Tuesday, December 29, 2020

Accountability With A Capital "Ism"

Several colleagues and I have published a new article, entitled "Accountability with a Capital “Ism”: A Computational Simulation of the Accountable Capitalism Act vs. Delaware Corporate Law", in the Ohio State Technology Law Journal (OSTLJ). Here is the abstract:

In 2018, U.S. Senator Elizabeth Warren proposed S.B. 3348, the Accountable Capitalism Act. This Act seeks to alter corporate behavior to balance the effects of corporate actions across several different stakeholder groups, rather than focusing on the primacy of shareholders as is conventional in many U.S. state corporate laws. It has traditionally been difficult to determine the effects of the law in advance. However, innovative work in empirical legal studies is enabling experimental evaluations of laws through participatory simulation. We implemented such a simulation to compare the effects of the Accountable Capitalism Act vs. Delaware corporate law on director behavior.

We deployed this simulation to 300 human participants via Amazon’s crowdsourcing platform. Building on previous findings that showed that participants assigned to act as shareholder-selected directors and instructed via the Accountable Capitalism Act favored shareholders over other stakeholders in forced-choice contexts, this study found that such participants instructed via Delaware corporate law favored shareholders over other stakeholders as well. However, in a context where the alternate option was one that provided balanced benefits for several stakeholder groups, those instructed via Delaware corporate law placed significantly greater emphasis on shareholders than did those instructed via the Accountable Capitalism Act.

Based on the results from the human participants, we constituted 3000 “virtual boards of directors,” composed of randomly selected groups of study participants assigned to different types of directorships. Results from the virtual boards of directors suggest that boards composed of shareholder-selected directors instructed via the Accountable Capitalism Act led to lower levels of disparity across different stakeholder groups than those composed of shareholder-selected directors instructed via Delaware corporate law. In addition, those composed of 60% shareholder-selected directors and 40% employee-selected directors, as specified in the Accountable Capitalism Act, led to still lower levels of disparity than those composed solely of shareholder-selected directors.

While these findings are based on interactive simulations rather than the real world, and based on the behavior of everyday people rather than business executives, they nevertheless provide experimental evidence that two key aspects of the Accountable Capitalism Act—the requirement for directors to consider the effects of corporate actions on various stakeholder groups, and the representation of employees on corporate boards—both produce results in line with their desired effects. Taken together, these results provide experimental support for the proposition that the Accountable Capitalism Act would lead to more balanced corporate behavior than does Delaware corporate law.

The article is available free here.  Thank you very much to the dedicated and talented staff of the OSTLJ for all their hard work and editorial assistance. 

Monday, December 21, 2020

The Crown Evolves

Viral genomes can mutate rapidly.  Extensive genomic sequencing of SARS-CoV-2 in the United Kingdom during 2020 has identified several distinct phylogenetic lineages.  In a report published on December 19, 2020, the Covid-19 Genomics UK Consortium ("COG-UK") describes several notable features of one these clades, which has been designated B.1.1.7:

Has 17 mutations (14 replacements and 3 deletions) including: T1001I, A1708D, I2230T, SGF 3675-3677 del In the ORF1ab; 69-70 del, Y144 del, N501Y, A570D, P681H, T716I, S982A and D1118H in the Spike; Q27stop, R52I and Y73C in ORF8; D3L and S235F in the N.  Noteworthy N501Y enhances ACE2 binding affinity, 69-70del has immunological role and it is associated with some diagnostics failures, and P681H occurs at the furin cleavage site, known for biological significance in membrane fusion[.]

Worries that rapidly-spreading SARS-CoV-2 B.1.1.7 may be associated with higher infectiousness have led a number of countries to suspend direct flights from the United Kingdom.

Thursday, December 17, 2020

California Dreamin' Of Secession

 My colleague, Professor Bill Tomlinson (University of California Irvine), and I have published an article entitled "Fault Lines: An Empirical Legal Study of California Secession" in the Seattle Journal of Technology, Environmental & Innovation LawHere is the abstract:

Over the last decade, multiple initiatives have proposed that California should secede from the United States. This article examines the legal aspects of California secession and integrates that analysis with findings from an empirical study of public perceptions of such secession. There is no provision in the United States Constitution allowing states, or other political or geographical units, to secede unilaterally. The Civil War was fought to uphold this principle, and the United States Supreme Court confirmed it in its 1869 Texas v. White decision. Nevertheless, numerous instances of secession, both legal and extralegal, have occurred across human history, and there is continuing public interest in secession of various U.S. states, in particular California. We conducted an empirical study with 100 U.S. residents, half from California and half from other U.S. states, via Amazon’s crowdsourcing platform. We found that, while most participants (71%) opposed secession, a significant minority (25%) were in favor of it, with the remainder (4%) unsure. In addition, older people, and people who did not live in California, were statistically more inclined toward secession (37% in both cases) than were younger people (13%) and Californians (15%). Participants identified an array of themes relevant to California secession, including California being an “essential, vital component” of the U.S.; California being “indebted” to the U.S.; the U.S. keeping California “in check”; logistical factors such as “currencies,” “infrastructures,” “trade agreements,” and “a new military”; the “growing fascistic tendencies” of the U.S.; and feelings that California should “fend for themselves.” Other personal/idiosyncratic factors emerged as well, including residents’ concern about needing to “speak Spanish,” it becoming harder to “sell on eBay,” and that the “flags would need to be changed.” Still others were concerned about “violent confrontation” and “civil war.” Taken together, the legal and empirical factors paint a picture of the complexity of California secession, and offer insight into this and other instances of potential sociopolitical breakdown. Although unilateral secession would be illegal under U.S. law, we explore a number of peaceful secessions around the world, and abstract principles from them that may be helpful if California secession were ever to become a possibility. The numerous lines of argument provided by participants in this study, many of which find fault with the directions either of California or the rest of the U.S., help identify the stresses that could cause California to shear off and become a separate nation. While California would be the epicenter of this phenomenon, its aftershocks would likely be felt around the world.

Though most current California Dreamin' is probably about an end to the SARS-CoV-2 pandemic rather than independence, we hope the qualitative empirical data in our article sheds some light on the complex and controversial issue of secession.

Wednesday, December 16, 2020

Andrew W. Torrance On Innovation Hypercycles

For the past few years, I've been working on research project to try to explain differential rates of innovation.  The result is what I call "Innovation Hypercycles".  Here is my TEDx talk on the subject, entitled "Innovation Hypercycles:  The Birth and Death of Technology Hotspots", recorded on January 26, 2020, as part of TEDxQueensU, held at Queen's University, in Ontario, Canada.
I owe heartfelt thanks to Denise and Dave Simpson, their talented daughter, Samantha Simpson, and Samantha's TEDx colleagues for inviting me to this wonderful opportunity to speak about my ideas.

Friday, December 4, 2020

Trees' Company

My wonderful colleagues, Bill Tomlinson (University of California, Irvine), Rebecca Black (University of California, Irvine), M. Six Silberman (IG Metall), Yaqi Xie (University of California, Irvine)Paramdeep Singh Atwal (University of California Irvine), and I just published an article entitled "Judging Corporate Directors by the Companies They Keep: Results from an Interactive Simulation About the Motivations of Corporate Directors", in the University of Pennsylvania Journal of Law & Public AffairsHere is the abstract:

The directors of major corporations are hugely powerful in charting the course of industrial civilization. Who selects those directors, and how those directors make decisions, are therefore both topics of critical importance. Various legal frameworks, such as the Accountable Capitalism Act currently under consideration by the United States Congress, have proposed that shareholders and/or employees should have a say in the director-selection process. We conducted an interactive simulation experiment, based on the Accountable Capitalism Act and Delaware corporate law, with human participants acting as three different types of directors: shareholder-selected directors, employee-selected directors, plus a third, novel form of director, “environment-selected directors.” In this paper, we integrate quantitative and qualitative findings from this experiment to provide novel results about the behaviors of these participants, and the deeper motivations underlying their behaviors. We found a range of potential motivations that could affect directors’ behavior, including obeying regulations, being responsive to changes unfolding in the world, feelings of obligation to the stakeholders that selected them, and pre-existing biases toward or against particular stakeholders. We also found a strong penchant on the part of directors to engage in balancing of interests, even when instructed to favor only one interest, suggesting tension between existing corporate law and the preferences of individual directors. By providing experimental evidence into the motivations that may influence such directors’ behaviors, and in particular exploring the possibility of environment-selected directors, this paper seeks to lay the legal groundwork for broader stakeholder representation on corporate boards.

This article complements "'Environment-Selected Directors': An Interactive Simulation Experiment of Environmental Representation on Corporate Boards", which was published in the summer of 2020 in Ecological Economics, which I previously discussed on August 1, 2020, on Lexvivo in "The Nature Of The Firm".