Category Archives: Governance

Enbridge and Indigenous Rights at Citigroup’s Shareholder Meeting

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One of the many signs outside Citigroup headquarters during last week’s shareholder meeting.

A proposal brought by several religious orders at last week’s Citigroup annual shareholder meeting asked the company to report on its policies and practices “in respecting internationally-recognized human rights standards for Indigenous Peoples’ rights.” The proposal (page 125) specifically called out Citigroup’s financing of oil and gas operations in the Amazon, which “pose an ‘existential threat’ to Indigenous Peoples” in the region, and it applied equally strong language to the bank’s $5 billion-plus in financing to pipeline company Enbridge:

Indigenous leaders from the Great lakes tribes have called Enbridge’s line 5 pipeline reroute “an act of cultural genocide.” A 2022 ruling found that line 5 was operating illegally on Bad River Band territory since 2013. Michigan Governor Whitmer canceled Enbridge’s certification in 2020, citing “Enbridge’s historic failures and current noncompliance” as jeopardizing the safety of Michigan residents and the environment. Michigan’s twelve federally recognized Tribal Nations requested President Biden to decommission line 5 in 2021, and the pipeline faces ongoing litigation from numerous plaintiffs. The severity of Indigenous opposition is reflected by the Bay Mills Indian Community formally banishing the pipeline from its reservation, noting Enbridge’s deceptive tactics, poor environmental track record, and risk of “catastrophic damage” to Indigenous rights. Companies like Enbridge, financed by Citigroup, consistently fail to meet the international standard of free, prior, and informed consent (FPIC) with affected tribes.

Here’s audio of the brief discussion of that proposal at the shareholder meeting. Listen closely to Tara Houska present the case for the proposal. What follows is disappointing but no less revealing. Citigroup Chair John C. Dugan tells shareholders the board recommends voting against the proposal; then, after a question about why Citigroup misled shareholders about its financing of Enbridge Lines 3 and 5, Dugan effectively closes the discussion with evasive boilerplate. The board retreats to lawyered statements and specious claims like the one about Enbridge’s “industry-leading engagement policies.” Still, 31.6 percent of Citigroup’s shareholders voted for the proposal — an impressive showing.

P.S. An earlier version of this audio file was not showing up on phones — something to do with the way WordPress converted it, or failed to convert it. Sorry about that. It should work now.

Anti-ESG Activists Come To Intel

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A shareholder proposal asking Intel to square its business in China with its ESG commitments looks like a Trojan horse.

The proposal (Proposal 7, p. 130) argues that “Intel’s environmental promises and human rights commitments are belied by its cozy relationship with China, a country that is controlled by the dictatorial and inhumane Chinese Communist Party.”

Doing business with China, which is the largest greenhouse gas emitter in the world and which commits genocide against ethnic minorities – [sic] runs counter to everything that Intel claims to stand for. It is therefore critical that the Board commission and publish a third party review that includes experts who are fully aware of the dangers that China poses to ensure that Intel’s actions as a company live up to its words.

It’s brought by the Free Enterprise Project at the National Center for Public Policy Research, a conservative organization that has been around since the Reagan era, with longstanding ties to the American Legislative Council (ALEC) and the State Policy Network. The Center also counts among its allies the National Legal and Policy Center (NLPC), which last year scored a small victory at 3M when one of its proposals on China and human rights garnered an impressive 12 percent support. Intel is a new target for these groups, who claim to be outraged by the company’s about-face apology on Xinjiang in 2021 as well as its sponsorship of the 2022 Olympics.

These days, the Free Enterprise Project is (predictably enough) all about “Woke Capitalism,” a product of “the Left’s Radical ESG Agenda” that will result in “the leftist capture of American corporations.” Or, as they put it in their 2022 Investor Value Voter Guide, “the ESG boosters, both in and out of C-suites, want to make our lives poorer, less reliable and less safe, while enriching the enemies of the West, for no possible good outcome except their own self-aggrandizement.” This is the reasoning behind their opposition to everything from DEI to decarbonization.

This year’s Proxy Preview from As You Sow includes an entire section dedicated to bad faith proposals that sound an awful lot like this one and are in reality “anti-ESG.” The Free Enterprise Project and its allies tend to copy

verbatim the resolved clauses of their ideological opponents, or use language in resolved clauses that makes the resolutions appear to support sustainability objectives—although the rest of the proposals cite right-wing opinion pieces and argue against their purported goal.

The objective is to find a point of leverage, call out corporate hypocrisy, and demonstrate that ESG commitments are a costly and destructive diversion of company resources.

When it comes to human rights in China, right wing activists see that this strategy can get results: “this human rights issue – involving both slave labor and genocide of the minority Muslim Uyghur population at the hands of the CCP – animates factions from both the political right and left.” That’s from the Free Enterprise Project Investor Value report, cited above. As You Sow concurs:

The ideas in anti-ESG resolutions have no traction with investors—nor with many companies—and on average earn 4 percent support or less. The sole exception concerns doing business in China, where the left and right agree that China’s authoritarianism is deeply problematic, as is its persecution of the Uyghur people.

That “exception” helps explain the self-righteous, combative tone of the Free Enterprise Project proposal, and the copy-paste approach they and the NLPC have taken for this year’s proxy season:

Proxy Monitor data showing human rights proposals submitted by the National Center for Public Policy Research and the National Legal and Policy Center.

The question before Intel shareholders is what practical effect voting for this proposal might have. The board of directors opposes it, for all the usual reasons, so it is unlikely to pass; but it could garner enough support to qualify for re-submission. That would bring the Free Enterprise Project back again next year.

More importantly, the proposal would require that Intel engage “experts who are fully aware of the dangers that China poses.” Those are not necessarily human rights experts or even China experts, but people who qualify as experts because they are “fully aware” — that is, ideologically aligned on China with the National Center for Public Policy Research. Think Peter Navarro (or worse): that’s who would be engaging with the company, and whose views the company would “publish.” This doesn’t sound like a constructive way to push the company to raise human rights standards (or improve its business performance); it just sets the stage for right wing bluster, fake outrage, and ideological preening.

It is difficult for me to vote against any measure that asks companies to do more in the area of human rights, and I am disappointed by the Intel board’s boilerplate response. They could do so much better. But in this case I am voting with them and against Proposal 7.

Update. The proposal received 4.31 percent support at the 11 May Annual Stockholders’ Meeting, falling short of the 5 percent needed to qualify for re-submission next year. For more on Trojan Horse proposals, see the brief write-up in this 2021 report (page 59) from Glass Lewis, which I had not read before I wrote this post.

Who’s Still Talking about A Green New Deal?

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Almost nobody, as far as I can tell.

Just two short years ago, it seemed everyone at Davos was committed to striking a Green New Deal. This year, the phrase is no longer so fashionable, and you are more likely to come across it in populist rants against globalism and globalists or the Davos agenda.

Writing from Davos in the Wall Street Journal today, Walter Russell Mead eschews the term, arguing instead that any kind of deal that requires “coordination between private sector and political leaders,” and “global coordination” especially, will be repugnant to “the traditional standpoint of American pro-market conservatism.”

No argument there. What Mead doesn’t say, of course, is that the current policy environment favors some private-public coordination and some global coordination and industrial development over other kinds. The laissez-faire, go-it-alone, America First standpoint conservatives hold up for the world to admire is a fiction, rife with contradictions, a form of self-flattery or a story told in pursuit of policy goals. So is the soft denialism of the American right, which holds “that climate change will [not] arrive as quickly or be as devastating as the Davos consensus believes”; but Mead is probably correct that this position will carry the day in the US, at least for the near term.

The question, then, is what sort of deal or climate policy framework should we expect to emerge from this mix of soft denialism and anti-globalism? Nothing too ambitious or coherent, I imagine. The promises of the Green New Deal were abandoned almost as soon as they were made, or shortly after the 2020 election. So now what? I have been tentatively arguing that in the US we’re seeing the emergence of a Green Right. They will focus for the next couple of years on touting jobs in red districts (think infrastructure, mining, and EVs); taking an axe to environmental and financial regulation (e.g., permitting reform and attacks on “woke” ESG); setting border policy to keep migrants and refugees out; and striking an increasingly aggressive posture toward China (at Axios, Jael Holzman has a piece about how that could backfire).

And this program probably has better chances of taking hold in the US than the Green New Deal ever did.

The CEO Story, from Profitability Crisis to Polycrisis

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Michael Roberts’ historical chart of the G20 rate of profit.

I’ve written a little about the the invention of the CEO — the title, the office, and the social position described by that term. This chart from Michael Roberts’ blog showing the declining rate of profit can help reframe that discussion.

In this view, the term “CEO” first comes into use in the midst of the profitability crisis, in the late 60s and 70s, after the postwar Golden Age. The CEO’s heyday runs through the neoliberal recovery. The Fall of the Celebrity CEO (to borrow a term from Edelman) coincides with the start of the Long Depression.

Unfortunately, Roberts’ chart doesn’t run up to the present, which would show the rate of profitability continuing its decline in the face of multiple, entangled, global crises all at once, a polycrisis:

A global polycrisis occurs when crises in multiple global systems become causally entangled in ways that significantly degrade humanity’s prospects. These interacting crises produce harms greater than the sum of those the crises would produce in isolation, were their host systems not so deeply interconnected.

Having helped steer society to this precarious juncture, has the institution of the CEO now run its course? And what would it take to reinvent it, so that the business enterprise can help address the overlapping crises we face, improve humanity’s prospects, and play a constructive role in a new social contract? 

Some Misgivings about the End of Section 206

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2023 could see the end of Section 206, the New York LLC publication requirement. I have supported its repeal ever since I first came up against it, and I still support it, despite some misgivings. The legislation currently on the table does little to quell them.

Currently, New York Limited Liability Company law requires newly formed LLCs and LLPs to publish a notice for six successive weeks in two newspapers designated by the county clerk, “one newspaper to be printed weekly and one newspaper to be printed daily.” At the end of that period, founders have 120 days to file an affidavit of publication (and pay a $50 filing fee). Costs can run into the thousands of dollars, since local newspapers where the notices are printed — and they must be printed — effectively have a monopoly.

This part of the 1994 LLC law reads like an artifact from a bygone, pre-internet era, and it no doubt helped prop up struggling local newspapers financially even as the internet hastened their demise. It has also given rise to a professional services cottage industry.

Legislation to repeal Section 206 has been making its way at a slow crawl through the New York Senate and the Assembly since 2008. It was last referred to the Committee on Corporations, Authorities, and Commissions in January, 2022. In March of this year, the New York Bar Association came out in support of repeal. In November, the bill’s sponsors, Liz Kreuger in the Senate and Rebecca Seawright in the Assembly, both won re-election. So prospects for a repeal in the next legislative session look favorable.

The proposed amendments would not only repeal the publication requirement, but also establish something called the Department of State modernization fund. Notices would be published in an online database maintained by the Department of State; associated filing fees would go toward “the modernization and security of the Department of State’s public-facing website, and for developing alternatives to physical publication of documents.” The bill’s sponsors say it will “remove onerous and unnecessary requirements on LLCs and partnerships forming in New York state” and that online filings “will improve a citizen’s access to this information.”

The Bar Association rightly observes that LLC and LLP filing notices running in local newspapers are generally ignored. Publication costs are high; the current requirement “serves no legitimate business or economic purpose,” they write; and it creates an unjustifiable disparity, since New York corporations are not subject to the same requirement as LLCs. These are all good points, as almost anyone who has contended with the publication requirement will tell you, and 97 percent of the lawyers surveyed by the Bar Association agree.

In addition, eliminating the publication requirement will benefit the State of New York in several ways. It will likely increase business activity in New York, which will benefit the Department of State’s revenues. More companies forming and locating within the State would similarly benefit New York’s economy. As a result, this bill will likely lead to higher employment and greater tax revenue in New York. More companies with offices in New York will employ more New Yorkers, resulting in increased tax revenue to the State.

Here is where my misgivings start to kick in. It’s hard to say how “likely” any of this really is. The publication requirement is an inconvenience and a burden, but how many companies have really been deterred from forming and locating in New York because of it? When it comes to choosing between New York and Delaware, how much does Section 206 factor into the decision? Delaware LLCs and LLPs that do business in New York still have to register to do business here, pay an annual filing fee, and comply with New York tax laws. Could the repeal make New York the new Delaware? Unlikely: Delaware will still enjoy institutional advantages (namely, the Court of Chancery) and a reputation, deserved or not, as the best place to form a business and raise capital.

Maybe Delaware sets the bar too high. Will the repeal significantly increase business activity and contribute to higher employment and greater tax revenues? Look at the trend line on this US Census Bureau graph. Is the repeal of Section 206 the thing to keep it moving north? Will the upward trend accelerate once the legislation passes?

Time will tell, and some measure of skepticism seems warranted. What’s more, the repeal could have adverse consequences as well as benefits. What happens to the small, local print publications that have been practically subsidized since 1994 by LLC listings? Those local newspapers may not matter so much in New York City, where we have several daily newspapers (but I’m not sure that argument can stand much scrutiny), and protecting New York City publishers’ Section 206 interests may be outweighed by the economic benefits anticipated from the repeal. But what about in more rural counties?

Do printed daily and weekly newspapers still serve rural, or, for that matter, urban communities in other ways? Let me overdramatize just to drive the point home:

No surprise that local print publications failed to catch this brazen fraud.* It’s the rare local newspaper that can support investigative journalism or take on a newly elected member of Congress; and a Section 206 zombie newspaper probably isn’t going to be up to the job anyway. Subsidizing publishers on the back of new businesses, which is essentially what 206 does, is not the same thing as supporting local journalism. Still, it would be good to know or at least see some public discussion of what these print publications contribute to their communities before they try to set up entirely online or just fail; it would be even better to see some legislative efforts to keep local journalism alive. The LLC publication requirement cottage industry will likely disappear, too. I have more trouble shedding a tear for its demise.

Another set of questions concerns the modernization fund, its reach and its governance.

The legislation places the fund under the custody of the State Comptroller and specifies that “on the warrant of the State Comptroller” the moneys in the fund will be paid to cover modernization and security upgrades to the DOS website and development of digital alternatives to the current publication system. Moneys in this fund are “to be kept separately and not to be commingled with other moneys” in the Comptroller’s custody.

But what falls under the fuzzy heading of “modernization”? What does the firewall between modernization and other Department of State projects look like, and how will it be maintained by successive Comptrollers? Is modernization a project without end, lasting as long as the filing fees keep adding to the coffers? At bottom, my concern is that the modernization fund could, over time, turn into a consulting industry slush fund.

If it becomes law in the next legislative session, the repeal of Section 206 could do all that it promises to do: relieve founders and partnerships of a costly, bothersome requirement, improve public access to corporate records, and even deliver some limited economic benefits. It could also undermine or fail to serve the public interest in other, unanticipated ways.

*Update, 23 December: It turns out a local newspaper, The North Shore Leader, was wise to Santos’ fraud months ago. And the Leader is among the newspapers designated for publication of legal notices by the Nassau County Clerk.

This Twitter thread is also worth reading:

Will the 118th Congress See A Green Right Coalition?

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Yesterday’s post about Nancy Pelosi’s remarks on China belongs to one strand of a larger story that’s coming into focus.  It’s a story about China and human rights, to be sure, but also about what role human rights issues will play in the transition to renewables and in the politics of the transition.

House Republicans on the Natural Resources Committee have already cited reports of human rights abuses in China and in the Democratic Republic of Congo (where Chinese companies control cobalt mining operations) as an argument for boosting extraction of critical minerals here in the US. As the gavel passes in the coming year, their position is likely to attract even more support.

In fact, the 118th Congress could see the emergence of a Green Right coalition: hawkish on China, touting the magic of markets, openly hostile to the administrative state, and more interested in achieving energy dominance (to borrow a phrase from the Trump years) than in paying lip service to a just transition (as some Democrats do).  The incoming Chair of the House Energy and Commerce Committee, Cathy McMorris Rodgers, plans to “outcompete China on climate:” that phrase sums up a whole political and geopolitical agenda. 

The program could be a political winner: anti-China, pro-growth, industry-captured climate policy may accelerate organized labor’s rightward drift; and the Green Right may even enjoy an uneasy honeymoon period with more left-leaning advocates of permitting reform.

Over the past year or so, as Joe Manchin tried but failed to advance his permitting deal, reformers have shown themselves ready to take an axe to environmental law, they have regularly dismissed public opposition as NIMBY whining, and some of them have done more public advocacy for extractive industry than seasoned lobbyists and flacks could ever dream of doing. 

Pelosi on the Moral Authority to Talk about Human Rights in China, or Anyplace

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Asked this morning about Republican plans to create a Select Committee on China in the coming year, Speaker Nancy Pelosi noted that there is already a bipartisan, bi-cameral committee on China and made this “statement” about human rights.

Corporate America has [been] largely responsible for the situation we’re in, in terms of the trade deficit and the rest…but from a standpoint of values, from the standpoint of economy, and from the standpoint of security, China poses a challenge to us….We want to work together on climate issues and the rest, but, but we cannot have our workers disadvantaged by China having prison labor manufacture products or contribute to the manufacture of products that just provide unfair competition for us….My statement is that if we refuse to talk about human rights in China because of economic issues, we lose all moral authority to talk about human rights anyplace in the world.

Predictably enough, the press conference moved on quickly from there. A follow-up question on legislation to ban TikTok failed to elicit anything more on US economic interests and human rights in China. Here’s video of the moment:

A Newer Map of Lake Superior Mining and Mineral Exploration

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This map helps us imagine what the onshoring of critical minerals production could bring to the Lake Superior region.

This looks like the most recent version of a map I’ve posted before, in 2013. It’s published by the Transportation and Resource Extraction Committee of the Great Lakes Indian Fish and Wildlife Commission.

The GLIFWC map appears on page 73 of the 2020-2024 Lake Superior Lakewide Action and Management Plan put out last week by the governments of the United States and Canada.

The report includes lots of information about mining in the Lake Superior region that deserves consideration. The report also notes: “The cumulative impact of mines on the ecological integrity of Lake Superior is not well understood.”

The Boundary Waters, Offshore: Luksic in the Pandora Papers

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A chart of Luksic-connected offshore entities included with the CIPER report.

Last week, El Centro de Investigación Periodística (CIPER) published an investigative report on the offshore financial activities of Andronico Luksic Craig and the Luksic family, based on the Pandora Papers — a trove of over 11 million records leaked from tax havens in the British Virgin Islands. The investigation cast some new light on the elaborate network of offshore corporations, foundations, law firms, and corporate services companies involved in managing some of the Luksic family’s vast fortune, and brought me back to some of the records I’d uncovered in connection with Luksic’s purchase of the Washington, DC mansion where Jared Kushner and Ivanka Trump lived while serving in the Trump White House.

Luksic acquired that $5.5 million Kalorama property right after Trump won the 2016 election, right around the time Kushner-Trump were preparing for their move to the nation’s capital and at a critical moment when Antofagasta plc, the Chilean mining company controlled by Luksic, was counting on the Trump administration to reverse policies of the Obama administration (which it duly did). This neat arrangement may not have been a simple quid pro quo, a mansion provided in return for government approvals to mine copper and nickel on the edge of the Boundary Waters, but even to the casual observer it looks an awful lot like a foreign emolument. Unfortunately but not surprisingly, the matter never underwent a formal ethics review. (More on all that here, here, and here.)

While these new documents do not directly shed light on the Kalorama emolument, they provide some insight into how Luksic’s control of Antofagasta is connected to offshore schemes and how the Kalorama mansion might figure into a network of Luksic-controlled US property holdings.

One company called out in the CIPER investigation, FDMDA Corp, looks like a more elaborate version of a company I came across in Boston property records, LDMD Corp, which was registered as the owner of two Avery Street properties from 2011 to 2013. FDMDA carries the first initials of the names of Luksic’s five children, while LDMD appears to have been created solely for the male heirs. (I am assuming the L in LDMD stands for Andronico Luksic, the first-born son, with DMD representing Davor, Maximiliano, and Dax.) Two others, Beacon Eagle Corporation and Avery Eagle Corporation, also look like another iteration of Boston property-holding companies formed by Luksic attorneys, Avery Bicentennial Corp and The Avery Millennium Corp.

These corporations owned and still own condominiums on Avery and Beacon streets in Boston. The Beacon Street property includes a penthouse that Luksic (or, rather, Avery Bicentennial) purchased from quarterback Tom Brady in 2012 — which is right around the time that Luksic says he and Donald Trump “said hello” or exchanged a greeting at a New England Patriots’ game, where they would have been guests of Brady, a mutual acquaintance, or of billionaire owner Robert Kraft. So Brady connects Luksic to Trump — suggesting there might be a little more to the Kalorama mansion story than serendipity. What’s not clear is how the entities formed around the Boston properties, or even Luksic’s Miami and Washington DC properties, might be legally connected with the two Eagle companies mentioned in the Pandora Papers.

On April 28, 2017, FDMDA Corp and Beacon Eagle Corporation were relocated from the British Virgin Islands to Liechtenstein, where they were subsumed under an entity called The Lazare Tcherniak Foundation. (The disposition of Avery Eagle remains unclear.) The Lazare Tcherniak Foundation “provides for the economic furtherance of the descendants of Nadia Malvine Tcherniak” — Patricia Lederer Tcherniak is Luksic’s ex-wife and mother of his five children — “that bear the name Luksic as their first or second name and that are also biological descendants of Andronico Luksic Abaroa [Andronico Luksic Craig’s father]. They are all members of a generally defined and fully discretionary class of beneficiaries.”

While Beacon Eagle appears to be bound up with US-based real estate investments, FDMDA Corp. serves Lazare Tcherniak Foundation beneficiaries by managing and distributing stock dividends. Records reviewed by CIPER describe the source of FDMDA Corp’s funds as “mining activities in the Republic of Chile. The funds are mainly dividends indirectly received from Antofagasta plc, a public company listed on the London Stock Exchange.” Here, “indirectly” probably indicates that there is an entity — a partnership — to which the Antofagasta plc dividends are paid before they are distributed, in whole or in part, to the Liechtenstein-based FDMDA Corp.

Of course, all of this appears to be perfectly legal, as Andronico Luksic himself pointed out in a tweet responding to the CIPER report.

While technically true (“Liechtenstein is NOT a tax haven” because Chilean tax authorities don’t include it in their list of tax havens), this statement was rapidly ratioed. Along with President Sebastian Piñera’s own exposure in the Pandora Papers, Luksic’s exposure and his carefully lawyered response just provide more fodder for the debate over inequality in Chile.

Luksic’s  October 6 statement also prompts questions about corporate governance, the extent of the Luksic Group’s reach, and its attendant responsibilities. With a controlling interest in Antofagasta plc, the Luksic Group can easily thwart any shareholder resolutions not to its liking and effectively determine how the company and its subsidiaries are run, all from behind the scenes and with little accountability. That is shadow governance, and it’s the very model of corporate governance that Antofagasta brings to its Twin Metals project near the Boundary Waters.

Postscript. Oct 20, 2021. The same elaborate network of Luksic foundations, offshore companies, tax havens, and investment vehicles is evident in the disclosures filed by Antofagasta’s three lobbying firms: Brownstein Hyatt, Wilmer Hale, and The Daschle Group. I addressed the topic in this Twitter thread:

Read more about the Boundary Waters reversal here. 

John Ruggie (1944-2021)

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Word of John Ruggie’s passing prompted me to look back at the times I engaged with his work on business and human rights, including these ten posts, and to revisit the one instance I know of where he engaged with mine. This was an endnote he wrote, with a link to this blog, for Life in the Global Public Domain.

It was nothing more than a brief reference (“also see…”), but it made an impression on me. After all, who was I to John Ruggie? Not a student, not a colleague in any formal sense. We never even met. But I read him and respected his work; and to my great astonishment, he read me and repaid me in kind with a small, gracious gesture.

Here, the Business and Human Rights Resource Centre has collected tributes to John Ruggie from around the world.