Tag Archives: trust

Three Questions for the Michigan DEQ on the Back Forty Project

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Earlier this month, the Michigan Department of Environmental Quality announced its intention to permit the Back Forty Project, an open-pit gold and zinc sulfide ore mine that Aquila Resources, a Canadian company, plans to develop near the headwaters of the Menominee River. In response to the MDEQ’s request for public comment by November 3rd, I’ve submitted these three questions. I’m posting them here so that others might consider them in the run up to the public meeting with the MDEQ in Stephenson, Michigan on October 6th.

  1. In determining that the Back Forty Project application meets the requirements for approval under Part 632, did MDEQ take into account the cumulative effects of sulfide mining throughout the Lake Superior watershed? We know that the Back Forty project poses a significant risk to the Menominee River all by itself. With the mine in close proximity to the river, a flood, berm collapse, subsidence or a slide could destroy the Menominee River; to answer these serious concerns by asking the company to add a “synthetic, manmade liner under their waste/tailing rock facility,” as the DEQ has proposed, is to trivialize them. Other development that the mine will inevitably bring, including haul routes, power lines, lights, fueling stations, exhaust and machine noise, will leave a large industrial footprint and disturb the Menominee River and its environs in countless ways. At the same time, this mine will heighten the risk, in the long term, of large-scale environmental destruction posed by the resurgence of sulfide mining not just in Michigan’s Upper Peninsula, but in Minnesota and Canada as well — all around the lake and throughout the Lake Superior watershed. Has the DEQ completed or participated with neighboring state agencies and tribal authorities in a scientific study of the cumulative impacts of sulfide mining around Lake Superior? Has the DEQ issued guidance on how cumulative environmental effects should factor into its decision-making process for permitting new mines in Michigan?

  2. Has MDEQ made any determination about the human rights implications of its decision to allow the Back Forty project to go forward? Human rights are not outside the DEQ’s bailiwick, no matter how hard it may try to exempt itself. Witness Flint. In the present case, the DEQ’s oversight is inextricably bound up with the state’s obligation to protect human rights abuses by third parties. Aquila’s Back Forty project is sure to disturb, and likely to desecrate, lands traditionally belonging to the Menominee and still held sacred by them; and making provisions for archaeological recovery and preservation of mounds and other sacred sites does not adequately address the basic human rights issues involved here. The headwaters of the Menominee River are central to the tribe’s creation story, marking the place where the Menominee people originated. Their very name derives from manoomin, or wild rice, which will not survive changes in sulfate levels or degradation of overall water quality. As tribal member Guy Reiter has said, “It’s no different than if an open-pit sulfide mine was put in Bethlehem for the Christians.” Seen from this perspective, the Back Forty is not only an affront to Menominee history; it also puts the cultural survival of the Menominee people at risk. How will the DEQ factor such human rights considerations into its decision-making process?

  3. What has the DEQ done to restore trust in its authority, and reassure the Menominee and people living downstream from the Back Forty project in Michigan and Wisconsin that it will exercise appropriate care? The Flint water crisis cast a long shadow, and reinforced the perception that “politics and poverty are big factors” in DEQ decision making. “The same attitude of disregard for citizens and the environment has repeated itself in DEQ decisions across our state for well over a decade,” said Marquette attorney Michelle Halley after news of the Flint water crisis broke; controversy over the renewed Groundwater Discharge Permit issued by MDEQ at Eagle Mine and legitimate concerns about lax oversight at Eagle East help make her case. Like all government agencies, the Michigan DEQ should operate in sunlight. Already, however, troubling questions have been raised about the transparency of the Back Forty permitting process. For example, Al Gedicks, Executive Secretary of the Wisconsin Resources Protection Council, asks why the DEQ appears to be in a “rush” to grant the Back Forty permit. So as things now stand, the DEQ enjoys de jure authority in Michigan under Part 632, but it is unclear whether the DEQ still enjoys de facto authority, which could only derive from demonstrations of regulatory competence. How does MDEQ intend to quell public concern that it is compromised or incompetent, and reassure the public that it is a responsible steward?

Does Eagle Mine Have Social License to Operate?

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Lundin Mining CEO Paul Conibear hit all the right notes when he announced last week that Eagle Mine is now in production. Completed ahead of schedule and on budget, the new nickel and copper mine on Michigan’s Upper Peninsula marks “a tremendous achievement”:

The Eagle Mine is a significant new, high-quality, low-cost mine, that has been constructed to the highest of safety, environmental and social responsibility standards.

Our team has done an exemplary job in bringing the mine into production, and we look forward to the operation becoming a significant cash flow generator for the Company and a significant contributor to the local and regional economy. We would like to thank all employees and contractors for their dedication and excellent work in addition to all local stakeholders for their ongoing support.

Analysts and investors seemed pleased as well, and happy to take Conibear at his word. The company’s share price, which had been trending downward, ticked up the day after the announcement. Lundin Mining is “hitting the ground running,” declared one enthusiast, who goes by the pseudonym The Investment Doctor and published his report right on the heels of the company’s press release; “and it’s rare to see a large scale project being completed ahead of schedule. The production is starting just in time to benefit from a strong nickel price.”

Those inclined to follow the Doctor’s advice may wish to consider that his analysis focuses solely on nickel production, and makes no mention of what’s happened to copper prices lately: they’ve plummeted (though, to be fair, they now seem to be rebounding slightly).

In any case, the whole picture may be a little more complicated than the mining company and its boosters would have us believe. Eagle will count as “a significant contributor to the local and regional economy” only if you overlook the effect the mining operation is bound to have on tourism (which currently makes up around 20 percent of the Marquette area’s economy) and the many other detrimental and distorting effects mining will have on the economic life of the Upper Peninsula. Economist Thomas M. Power has run these down. For one thing, he observes, mining operations can hinder entrepreneurship and innovation, and drive away creative professionals and knowledge workers. They prefer not to live around a mine, or on the haul route from mine to mill; nowadays even the miners would rather commute. It remains unclear, too, how the region will benefit in the long term, after the accessible ore runs out and Eagle shuts down.

So one has the feeling that the tepid term “contributor” in Conibear’s statement about the broad economic benefits of the new mining operation was chosen with care: it positions the mining company as a social benefactor, but it reserves any talk of wealth generation for the “flow” of cash into the company coffers. Some will trickle down: the contribution Eagle makes to the economy will be “significant”; but even saying that leaves wiggle room to back away from stronger and more specific language about job creation that was used to promote the project in the first place. The main object here is to reassure Lundin’s creditors.

To bring the bigger picture into focus, we also have to take into account the social costs and environmental risks associated with this new mining operation. When Conibear says that Eagle Mine was built to “the highest of…standards,” I guess he’s talking about mining industry standards. At least some environmental and community groups have different and even higher standards, and they are not satisfied with DEQ enforcement to date or with the Community Environmental Monitoring Program established by Rio Tinto and the non-profit Superior Watershed Partnership (for which Lundin Mining will pay $300,000 annually). For local stakeholders like the Keweenaw Bay Indian Community, who opted out of the Superior Watershed Partnership deal, the new mine falls short on many important counts. Together with the National Wildlife Federation, the Huron Mountain Club and the Yellow Dog Watershed Preserve, the KBIC sued, only to lose in the Michigan Court of Appeals in August of this year; but that loss hardly means the concerns that motivated the twelve-year legal challenge to the mine were without merit.

The stark fact remains that like Rio Tinto before them, Lundin Mining cannot point to a single example of copper and nickel mining in the United States or Canada that did not pollute surrounding waters or groundwater. Questions raised by Jack Parker about the geological stress field of the Yellow Dog Plains — and the risk of “sudden collapse” he alleges was covered up by regulatory collusion — continue to be “studiously ignored.” Haul road construction has been mired in controversy: it took corporate wrangling of the County Road Commission and exercise of eminent domain to push through the the current route; and that road work has already violated the Natural Resources and Environmental Protection Act.

The point is not to multiply examples or revisit all the controversies that still surround Eagle Mine. Now that the mine is in operation, some of these issues may even be “moot,” as a writer in Crains suggested after the decision by the Court of Appeals in August. But taken together, they raise the question whether Lundin Mining has done enough (since purchasing the Eagle operation from from Rio Tinto) to earn the trust, let alone gain the support, of local stakeholders who were not already in the mining camp or the mining company’s pocket. So far, Lundin has demonstrated that it can bulldoze ahead and get stuff done. Its claim to social license remains unsettled.

Serious Conversations, 3

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So far in these notes on serious conversations I’ve talked about questions of authority and trust as well as the joint commitments conversations entail. What little I’ve managed to say may not amount to more than the observation that what makes a conversation “serious” has less to do with subject matter than with the mutual obligations of its participants and their disposition toward the activity of conversation.

Let me spell that out a little more. In order for a conversation to be serious, all parties would have to enter freely into it. So a police interrogation or a dressing down at work are not very likely to qualify as serious conversation, though I wouldn’t rule out the possibility that they might become serious if things were to take an unexpected turn. Joint commitment can’t be coerced; and while it’s possible that one party in a conversation might officially be in charge of things, by election, contract or appointment, all parties have to be vested with equal authority in the conversation — or have equal standing to make claims of others, despite differences in title, social stature, organizational standing, etc. To put it another way, all parties in a serious conversation are mutually accountable to each other.

In subsequent posts I hope I can explore this basic position a little more and strengthen it — or, if need be, abandon it in favor of something more compelling. Right now I want to be clear that while serious conversation requires parity, it’s still possible to lead a serious conversation, so long as leading the conversation does not violate the covenant or commitment the participants have made. It all comes down to how one leads, and it’s possible — it’s very easy — to mislead a conversation: it happens all the time.

For example, someone might insist on getting to the point. A rule of serious conversation applies here: the point is almost beside the point.

The primary point of any conversation, which takes precedence over any insight, conclusion or plan for action the conversation might eventually yield, is that we have jointly committed to do something together — namely, have a conversation. That commitment will entail obligations to each other, some of which we can enumerate right at the outset, because we know, roughly, what conversation will require: e.g., you can’t suddenly walk away, or I can’t start singing “la la la” while you are talking or patronize you or coerce you into agreement. Others might become apparent only as the conversation wends its way, and neither of us can really know where the conversation will lead — unless, of course, one of us is being disingenuous or duplicitous, in which case the conversation is a sham.

When people insist we get to the point, they are not just short-circuiting the conversation; their efforts to control or wrap up the conversation risk foreclosing on claims we might make or unmet obligations we might have to each other as participants.

This is why, by the way, it’s important to be tolerant of meandering turns the conversation might take and of what I call verbal fidgeting and others call throat clearing: all the little tics and tacks we use before we actually get around to saying anything definite. Verbal fidgeting — “like,” “I mean,” “so…” “you know,” etc. — in conversation can be an annoyance, but it isn’t just noise; and noise-to-signal ratio is not the best metaphor for conversation.

Fidgeting can indicate that someone is uncomfortable with silence, which is worth attending to, because it might tell us the person isn’t listening or feels nervous and doesn’t know how to sit with the restlessness that being with others sometimes involves. But fidgeting can also help coordinate the conversation and the being together that conversation entails, bringing others in, building bridges, redirecting attention. At the very least it can help us get to know the habits and manners of the others with whom we’re speaking, and conversation happens where those habits and manners — those styles — meet.

Serious Conversations, 2

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Nora [after a short silence]. Isn’t there one thing that strikes you as strange in our sitting here like this?
Helmer. What is that?
Nora. We have been married now eight years. Does it not occur to you that this is the first time we two, you and I, husband and wife, have had a serious conversation?
Helmer. What do you mean by ‘serious’?
Nora. In all these eight years–longer than that–from the very beginning of our acquaintance, we have never exchanged a word on any serious subject.
Helmer. Was it likely that I would be continually and forever telling you about worries that you could not help me to bear?
Nora. I am not speaking about business matters. I say that we have never sat down in earnest together to try and get at the bottom of anything.
-Ibsen, A Doll’s House, Act 3

Preoccupations may be harder to escape than promises. I went to see a performance of A Doll’s House last night at the Harvey Theater, and this exchange between Nora and Torvald in the final act of Ibsen’s play reminded me of my pledge to say something more about serious conversations. (My first effort to make good on this pledge is here.).

There’s an important point here that I don’t want to overlook. A serious conversation requires something more than a serious subject to discuss. It may not have anything to do with the things we take seriously: business matters, for example. Well before we consider things, or the topic at hand, we have to sit down “seriously together” — alvor sammen, as Nora puts it to her husband Torvald in Ibsen’s Norwegian.

Of course, Torvald Helmer’s “honor” will not survive the serious conversation he and his wife have. The respect Nora ultimately demands —  the claim she makes on Torvald and on herself — will destroy their marriage and upset the bourgeois respectability of the Helmer household, or show it for the sham that it is. Torvald should have known: to sit down seriously together is always more about honoring the other than safeguarding personal honor. Or at least it’s a matter of honoring the joint commitment to have a serious conversation.

dolls-house

Torvald (Dominic Rowan) and Nora (Hattie Morahan) are about to have their first serious conversation in the BAM Harvey Theater production of Ibsen’s A Doll’s House.

I’m using “joint commitment” here in Margaret Gilbert’s sense — a commitment by two or more people as a body or plural subject, a we, to some act or activity: a walk or a conversation, for instance. For Gilbert, these joint commitments are commonplace associations by which we make up “the social world, the world of conversations, friendships, marriages, sports teams, discussion groups, religious orders, partisans, citizens and so on.”

In entering and living up to joint commitments, we share agency with others, and all parties are obligated — have a duty — to act in accordance with the commitment. “If our acting together, our conventions, and other central aspects of our lives together involve our jointly committing ourselves in one way or another, then our lives together are run through with obligations to one another and rights against each other, with the correlative standing to insist on various actions and rebuke for non-performance.”

To read the essays collected in Gilbert’s Joint Commitment (Oxford, 2013) is to appreciate above all how often and how effortlessly we enter into these joint commitments, just as a matter of course, and to be reminded that assumptions of trust, respect and mutual accountability infuse our everyday social experience.

These are all the issues that come to the surface when Torvald and Nora sit down seriously together, for the first time, to have their serious conversation. Whether we commit jointly to take a walk together (to use Gilbert’s favorite example) or have a conversation about work or a stifling marriage, what makes the activity serious is that we are on equal footing and mutually obligated to one another. Acknowledge that, honor it, and we have started to take one another seriously; deny it, or cover it up with patronizing gestures or power grabs, and we are probably heading for crisis or failure.

Serious Conversations, 1

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In a previous post I pledged to say something about serious conversations, so I’ve set out to make a little headway on that topic. This is a first try. I’ll correct or advance what I manage to say here in subsequent posts.

A rule of thumb: serious conversations are more likely to involve demands than commands.

I’m not giving up at all on the idea that commands can be legitimate or given legitimately, or that those being ordered about can vest the person giving the orders (by contract, consent or some prior agreement) with legitimate authority. (Without that authority, commands have to rely on coercion.) But usually a command is not an invitation to deliberate; instead, the person giving the command has already reserved all deliberative rights – all rights to determine what there are reasons to do – to himself.

Just the other day, on the subway, I overheard a man complaining about his boss to a co-worker. His boss had told him: “I don’t want to see you on any floors you’re not assigned to. You stay on floors 4, 5 and 6.” Whether the boss didn’t trust this guy to move about freely, had something to hide on the other floors (as the worker suspected), or had some other reasons for controlling and monitoring the movements of his workers – or just this one worker – is impossible to say. In any case, this order was not an invitation to discuss the best arrangement or to trade reasons, and the disgruntled worker could only speculate: “There’s gotta be a reason for that.” Gotta be, but in this case, the boss had arrogated all reasons and reason-giving to himself; and — tellingly — that had led the worker to distrust him and question his order-giving authority.

I gathered this example by eavesdropping, I know, and I have only one person’s side of the story, but for now let it stand. It helps shore up the point that commands issued without explanation – or without giving others a share in reasons – can damage trust and undermine the authority of the one giving the commands. Of course, the two things are intimately related: what is authority without trust?

Serious conversations invite others to share in giving and finding reasons and in determining what there are reasons to do. They create opportunities for co-deliberation. To undertake the search for reasons or the giving of them, together, we are required to vest each other only with an authority equal to our own – the authority to make demands of each other (or to hold each other mutually accountable). Recognizing that authority in others and in ourselves won’t necessarily build trust, but it is difficult to trust someone who refuses or neglects to account for himself and who does not demand or ask the same of us.

Hazards of the Copper Antimarket

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A couple of weeks ago, I wrote a post connecting Chinese urbanization with the new mining around Lake Superior. Chinese demand for copper — which is used in everything from large scale infrastructure projects to new housing construction — is likely what brought Rio Tinto to the Upper Peninsula in the first place. But the copper extracted by Rio’s successor Lundin Mining, which took ownership of the controversial Kennecott/Eagle Mine in Michigan’s Upper Peninsula just last week, or Polymet, which is developing a mine in Minnesota near the Boundary Waters Canoe Area Wilderness, won’t be shipped directly from the US to China. Instead, it will travel a long and circuitous route from Lake Superior through a tightly-controlled system of warehouses, and now the copper those warehouses hold will be the property of big financial firms.

This new arrangement — copper’s new holding pattern — entails new risks for the global financial system, the American economy and the places where copper is mined.

A story in the Times this past weekend reported that Goldman Sachs, Morgan Stanley and other big Wall Street players are already manipulating the market for aluminum, and developing Bank Holding Companies that will mix finance with global commerce in new ways. By hoarding aluminum and exploiting the rules of the London Metals Exchange — which the banks owned until just last year, when the LME was sold to a group of Hong Kong investors — Goldman and other banks are set to make billions of dollars without actually moving aluminum into the market. Copper, as the story noted, is “next up.”

Last winter, the SEC approved two new copper-backed Exchange Traded Funds, one from JPMorgan, which was the first of its kind, and a second from BlackRock. These new Copper ETFs not only permit but require JPMorgan and BlackRock to take possession of and physically store tons of copper in warehouses. It’s an audacious plan that will “ultimately allow JP Morgan, Goldman Sachs and BlackRock to buy 80 percent of the copper available on the market on behalf of investors and hold it in their warehouses.” A few firms will essentially control the world copper market — or to establish what rightly deserves to be called an antimarket. (The term is historian Fernand Braudel’s, and has been popularized by Manuel DeLanda).

Big copper consumers like Southwire and Encore registered their dissent, but SEC officials capitulated after heavy lobbying by too-big-to-fail finance. The SEC even said it shared the view put forward by the banks, that the new funds would “track the price of copper, not propel it, and concurred with the firms’ contention — disputed by some economists — that reducing the amount of copper on the market would not drive up prices.” Robert B. Bernstein, an attorney representing the copper consumers, suggested in a letter to the SEC last year that this took too narrow a view, and that copper prices were not the only thing to worry about. Bernstein argued that the investment houses’ hoarding of copper will disrupt the copper market, impede economic recovery, and work “contrary to the public interest.”

The public interest had some defenders at yesterday’s Senate Banking Committee hearing on Financial Holding Companies, where ETFs and the banking practices behind them came under scrutiny. Chaired by Senator Sherrod Brown and featuring expert testimony from Saule Omarova, Joshua Rosner, Timothy Weiner and Randall Guynn, the hearing touched several times on how the control of metals markets by financial players like Goldman and JPMorgan will affect the American consumer and greatly heighten the risk of another financial crisis like the one in 2008 — and necessitate another bailout by American taxpayers of firms that are too big to fail (but seem, oddly, hellbent on failure).

At the hearing’s end, Sherrod Brown said we need “to ask ourselves what it does to the rest of our society when wealth and resources are diverted into finance.” It was a good summary comment, because the hearing raised a whole host of questions about the social hazards this diversion entails.

For instance, what effect will these ETFs and financial manipulation of the global copper market have on the communities where copper is mined? Yesterday’s hearing didn’t directly address the point. Randall Guynn tried to suggest that a bank-controlled mine in a bank-controlled market where the bank warehoused and manipulated the price of the metal being mined would create a reliable and steady labor market. But others warned that the speculative bubble will inevitably burst, and that will leave both investors and communities in the lurch. Even while the boom lasts, workers and communities are likely to be powerless against giant commodity-extracting, -holding and -trading financial conglomerates with lobbying power, friends in high places and apologists like Randall Guynn.

Will the cornering and squeezing of the copper market by big finance exert new pressures to relax environmental controls? Why not, especially since multinational miners already complain about the delays caused by prudent environmental assessments? Both Omarova and Rosner asked us to imagine a scenario in which the Deepwater Horizon catastrophe happened on an oil rig owned by JPMorgan; now, with banks moving aggressively into copper, a mining catastrophe like the Bingham Canyon collapse (which I wrote about here) could send shockwaves throughout the entire financial system. “If we saw a catastrophic event at non-financial facility,” Joshua Rosner told the Committee, “the impact to the [financial] institution and the Fed would be catastrophic.”

Omarova stressed the complexities of these commodity markets, and expressed serious doubts that regulators “can oversee risks caused by Bank Holding Companies and this mixture of commerce and banking.” Rosner echoed these concerns: “to suggest regulators have ability to manage holding companies is to ignore all the areas regulators failed to oversee in 2008,” he said. Worse, the banks themselves would be incapable of predicting, controlling or even appreciating the risks to which they are exposed.

I made a similar point about JPMorgan’s inability to manage its exposure to human rights risks in the wake of the London Whale episode.

The new mix of banking, speculation and holding of commodities, said Saule Omarova, may make another London Whale more likely, and worse. So history may be about to repeat itself. Omarova went on to suggest that in making their moves into the commodities markets, Goldman, JPMorgan and the other firms playing this dangerous new game seem to have adopted a business model pioneered just a little over a decade ago, by Enron. That observation prompted Senator Elizabeth Warren’s dark comment: “This movie does not end well.”

The Limits of Corporate Benevolence, from Mongolia to Michigan

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The phrase “human rights” is nowhere to be found in the Oyu Tolgoi Investment Agreement, a document [pdf] that will play a critical role in guiding Mongolia’s development over the next decade. The Agreement sets the terms for the $6.2 billion investment in the Oyu Tolgoi gold and copper mining project, which promises to account for no less than one-third of Mongolia’s GDP by the year 2020. Rio Tinto has a 66 percent stake in the project through its subsidiary, Turquoise Hill Resources Ltd; the Mongolian government owns the rest.

Along with the serious environmental concerns cited by the United States when it abstained, in February of this year, from a World Bank investment scheme in Oyu Tolgoi, there are a host of human rights issues to address — from migrancy to land seizures, rights to the scarce water resources of the Gobi desert region, conditions in Ulaanbaatar’s Ger camps, and the survival of Mongolia’s herder communities. (The Bank Information Center provides an overview of these concerns, here and here.) The Investment Agreement briefly addresses some of these points, but it resorts, in all instances, to what I would call the language of corporate benevolence.

So the Investor agrees to abide by the Extractive Industries Transparency Initiative (a voluntary agreement to publish payments made by the Oyu Tolgoi mine to the government); in another place (section 4.13; but cf. also section 4.6) the Investor consents to “build and maintain productive working relationships, based on principles of transparency, accountability, accuracy, trust, respect and mutual interests, with non-governmental organizations, civic groups, civil councils and other stakeholders.” Beyond this, there is not much else to guide or govern the company’s conduct vis a vis civil society and its responsibility to respect human rights.

Given the high stakes, the scale of Oyu Tolgoi and the involvement of the World Bank and IFC in the project, it is surprising the Agreement does not explicitly incorporate — or reference — the UN Guiding Principles on Business and Human Rights. Instead of creating binding agreements or even practical mechanisms to ensure that Oyu Tolgoi and the government of Mongolia meet their respective human rights obligations as the economy accelerates and the social terrain continues to shift, the Investment Agreement relies on the language of corporate social responsibility to smooth things over.

Part of the trouble with CSR isn’t just that it tends to replace binding agreements and articulated responsibilities with vague sentiments, the language of corporate benevolence, and promises of sustainability and shared prosperity. That’s bound to happen when social responsibility meets public relations. A bigger problem is that the commitments companies voluntarily make to contribute to economic development and social progress — and to respect human rights — will last only as long as the business requires them.

For an example of how abruptly a company can ditch stakeholder communities, what happened in Michigan yesterday with another Rio Tinto project may turn out to be more instructive than what’s happening right now in Mongolia. In the face of serious environmental and human rights challenges to its Eagle Mine project over the last several years, Rio Tinto all along touted its good corporate citizenship, promising to “leave more wood on the woodpile” and to take an active hand in the long term, “sustainable development” of the Upper Peninsula. That is just part of “The Way We Work,” as the title of a Rio Tinto CSR publication would have it — or at least it was the Way We Worked. Yesterday, the company announced that it had sold the Eagle Mine project to Toronto-based Lundin Mining for the tidy sum of $325 million cash — part of CEO Sam Walsh’s strategy to divest from “non-core” assets and protect the single-A credit rating the company currently enjoys. A community of stakeholders whose future Rio Tinto promised to make happy, bright and prosperous became, overnight, a disposable asset.

Is Every Conversation Illegal? A Follow-Up on Shareholder Engagement

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In a comment on Jackson and Gilshan’s “Call on U.S. Independent Directors to Develop Shareholder Engagement Strategies” — which I discussed in a previous post — Robert A.G. Monks sounds pessimistic.

If I read him correctly, he doesn’t think we’ll ever manage to create “an open and trusting format” of the kind Jackson and Gilshan recommend, where shareholders may “discuss the full range of company business with a director.” Monks says that what’s “missing” from the American scene is precisely a “framework for effective shareholder dialogue,” but he thinks that will remain “only aspirational on our side of the Atlantic.” Why? because there are legal obstacles that make companies skittish: “Indeed, counsel for the board of a NYSE listed company has explained to me – patiently – why it would be illegal for an individual board member to meet with me to discuss company business.”

A longtime shareholder activist who has written about a range of corporate governance issues, Monks wields a great deal of authority on these topics, so I defer to his experience and hope to benefit from his insights. I can appreciate, too, how frustrating it must be to be told that the law — and what he calls “orthodoxy” — prevent discussion. But I hope he’s not recommending we resign ourselves to the status quo.

Understanding, respecting and obeying the law is one thing, hiding behind it another. It doesn’t sound as if the counsel at the NYSE-listed company was hiding or trying to put Monks off, but you can also easily imagine that companies might take refuge in the assertion that the law and orthodoxy just won’t allow them to meet with or engage shareholders.

As I said in my reply to Monks’s comment, it might be illegal for an individual shareholder to sit down and whisper about company business with an individual director, but that isn’t the only possible scenario. There are still good faith efforts to be made, on both sides. A circuit of small gatherings, thoughtfully planned and dedicated to a particular theme, could offer one model. Shareholder proxy resolutions offer another opportunity for conversation — among directors, shareholders and stakeholders — before the resolutions are submitted or come to a vote.

In many cases, the shared experience of the conversation will be just as important as, if not more important than the content.

So the point here is not to multiply examples, but to suggest (as Monks himself suggests at the end of his comment) that there is good work to do on this front. The challenge, as I see it, is to create meaningful opportunities for face to face conversation and communication — for ongoing, purposeful “engagement”; the basic aim is to defuse antagonism, allow people to make connections, or simply ensure that everybody is in possession of relevant facts.

That there are legal obstacles here is no reason to give up. To my way of thinking, it’s all the more reason to develop a framework that U.S. owners and directors can use.

Kant or Castaneda?

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Fernando J. Grijalva and I have never met, but I hope we do someday. We’ve shared ideas, disagreed, and exchanged views, entirely online, usually in 140 characters or less. I consider him an intellectual companion, a “co-learner,” to use the word Fernando likes to use. Yesterday we shared an error.

It started when Fernando posted this quotation, attributed to Kant:

I was intrigued, and wondered what word Kant used here for “lives,” since that word (which, along with the nominative form “life,” never fails to intrigue me) seemed to be the crux of the thought. So I went searching, and in my haste I thought I found it in the Critique of Pure Reason.

Instead, it turns out, my quick scan of the Google search results misled me. This morning, when I tried to pick up the trail, my search led me not to the German text of Kant’s Critique, but to Carlos Castaneda’s A Separate Reality. Here is the passage in full. Don Juan is speaking:

‘I told you once that our lot as men is to learn, for good or bad,’ he said. ‘I have learned to see and I tell you that nothing really matters; now it is your turn; perhaps someday you will see and you will know then whether things matter or not. For me nothing matters, but for you perhaps everything will. You should know by now that a man of knowledge lives by acting, not by thinking about acting, nor by thinking about what he will think when he has finished acting. A man of knowledge chooses a path with heart and follows it; and then he looks and rejoices and laughs; and then he sees and knows. He knows that his life will be over altogether too soon; he knows that he, as well as everybody else, is not going anywhere; he knows, because he sees, that nothing is more important than anything else. In other words, a man of knowledge has no honor, no dignity, no family, no name, no country, but only life to be lived, and under these circumstances his only tie to his fellow men is his controlled folly. Thus a man of knowledge endeavors, and sweats, and puffs, and if one looks at him he is just like any ordinary man, except that the folly of his life is under control. Nothing being more important than anything else, a man of knowledge chooses any act, and acts it out as if it matters to him. His controlled folly makes him say that what he does matters and makes him act as if it did, and yet he knows that it doesn’t; so when he fulfills his acts he retreats in peace, and whether his acts were good or bad, or worked or didn’t, is in no way part of his concern.’ (emphasis mine)

Reading this again after all these years – as a teenager I devoured Castaneda’s books, but as an adult I’ve never gone back to them – I am surprised and impressed by the power of Castenada’s writing; at the same time it’s hard to believe anyone ever mistook this stuff for anthropology.

While I wouldn’t put it past the writer who made Don Juan out of whole cloth to have channeled or lifted something from Kant, here he sounds more like he is channeling some mix of Erasmus and Nietzsche.

Quoted out of context, the line about the man of knowledge sounds like serious philosophy, but turns out to be pseudo-anthropological fantasy (which may, in turn, have something philosophically serious to offer). In context, it’s not quite the lesson in pragmatism Fernando thought it was. So, for now, unless someone can find the sentence in Kant, Castaneda should get all the credit.

Another misattribution: be careful out there!

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It happened again today. Just now, a philosophy Twitter bot posted this quotation, attributing it to Cicero.

A noble sentiment. As of this writing it’s been retweeted 54 times and favorited 16, just an hour or so after it was first posted.

The only trouble is, these are not the inspiring words of the orator and statesman Cicero, but the words of Orfellus, “a peasant, a philosopher unschooled and rough,” as rendered by the poet Horace at the close of Satire II.ii.

Like Horace himself, Orfellus was dispossessed of his property; and he understands that neither he nor the new landlord, Umbrenus, has a legitimate claim to the land. It belongs to “no one for good,” but is ceded for use (cedet in usum). The Loeb trot continues:

Nature, in truth, makes neither him nor me nor anyone else lord of the soil as his own. He drove us out, and he will be driven out by villainy, or by ignorance of the quirks of the law, or in the last resort by an heir of longer life. Today the land bears the name of Umbrenus; of late it had that of Orfellus; to no one will it belong for good, but for use it will pass, now to me and now to another. Live then, as brave men, and with brave hearts confront the strokes of fate (quocirca vivite fortes / fortiaque adversis opponite pectora rebus).

I can’t figure out the source of the confusion, how or where the quotation came to be attributed to Cicero, how Cicero’s prose and Horace’s verse could be confused, and I don’t really know what to make of it all, except to reiterate that most books of quotations and nearly all quotation bots and sites proffering quotations are borrowing, cutting and pasting, or sloppily compiling from other compilations, and never working from original sources. Maybe that sort of spadework went out with the keeping of commonplace books. No matter, don’t trust any attribution that doesn’t cite chapter and verse; and even then, verify.

And if fortune is averse, front its blows with brave hearts. No, that’s not Mel Gibson.