Corporate Responsibility and the Spirit of the Law

November 16, 2022 | Podcast: Future-Ready Business

What are the rights and responsibilities of corporations and other types of companies? It’s a question that has been asked since corporations were first created, and the answer has changed over time. On this episode of FRB, we discuss with tech CEO and co-founder Yousef Kassim the ever-evolving field of corporate responsibility.

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Our Hosts:
Erin Camp

Erin Camp
Associate, San Antonio
Twitter: @BusinessLawyerE
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Art Cavazos

Art Cavazos
Partner, San Antonio
Twitter: @FinanceLawyer
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Episode Guest:
Yousef Kassim
CEO of Easy Expunctions
Twitter: @ykassim
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Episode Transcription

Erin Camp: Hi, I’m Erin Camp. A corporate finance lawyer with Jackson Walker.

Art Cavazos: And I’m Art Cavazos, a corporate and finance lawyer with Jackson Walker. And this is Future Ready Business.

Erin Camp: As always, we’d like to remind our listeners that the opinions expressed today are ours and those of our guests and do not necessarily reflect the views of Jackson Walker, its clients, or any of their respective affiliates.

Art Cavazos: That’s right. Our podcast is for informational and entertainment purposes only and does not constitute legal advice. Now, we’ve got a great show lined up for you today. So today we have a very special guest. Yousef Kassim, CEO of Easy Expunctions. Yousef, why don’t you explain a little bit what Easy Expunctions is.

Yousef Kassim: Thank you, Art. Thank you, Erin. Really happy to be here. Easy Expunctions provides individuals with a clear path to a clear record. So thank TurboTax for clearing your criminal record.

Art Cavazos: Very cool. And it’s a startup essentially, right? Would that be a fair characterization? And it’s a tech startup, would you consider it?

Yousef Kassim: Sure.

Art Cavazos: And so we talk about startups on this podcast. And you know, one of the things that we talked about was startup culture. And one of the aspects of startup culture that we talked about was something that is sometimes called corporate responsibility or corporate social responsibility. And so I know that that’s a topic that you’re interested in, which is why we wanted to invite you on today to talk about it.

Yousef Kassim: Yeah, thank you so much for having me. Definitely not going to be the expert on today’s talk, but just really happy to participate.

Erin Camp: We’re happy to have you.

Art Cavazos: Yeah, very happy to have you. And I think the way we’re envisioning this is, you know, we’re kind of practitioners from a legal perspective, you know, you’re really kind of out there doing it. You know, as a startup, as a CEO and a founder, you have employees, you’re in the industry, you’ve got investors, you’ve got to be thinking about. And so for us, it’s a little bit more academic of a conversation when we talk about corporate responsibility, corporate social responsibility. So I think we’re really interested to hear your perspective on what are all of kind of the real-life considerations kind of bring it back down to earth? So it doesn’t become, you know, too academic of a discussion?

Erin Camp: Yeah. And what are things you think, you know, CEOs, other CEOs could be doing to, you know, to be more responsible?

Yousef Kassim: Yeah, I think, first and foremost, you want to follow the letter of the law. So making yourself familiar with duties and obligations that you have as a business owner, especially when you start to take in investor dollars. At that point, you have additional responsibilities that you have to those investors. And I think, for us, specifically, we’re in the legal space, you know, I’m an attorney. But Easy Expunctions is not a law firm. And so we don’t represent our customers, we empower them to represent themselves. With that comes a number of considerations on unauthorized practice of law. And we’ve found that the best way to protect ourselves as a company, whether it’s corporate social responsibility, unauthorized practice of law, or, you know, whatever laws are relevant to the work that we do, is one, follow the letter of the law, but two, follow the spirit of the law. These unauthorized practice of law laws are here to protect consumers. And so we do everything that we can to protect our consumers, including 100% money back guarantee, every dollar out of our customers pockets. And then just internally, to borrow something from Google, you know, “do no harm.” That’s something that we take very seriously. And so we want to help as many people that we, as we can. But ultimately, we want to make sure that we’re not harming anybody during that process.

Erin Camp: And you know, that’s really interesting. And a great segue into what we’re going to talk about here, the concept of do no harm, and also the idea that you as the CEO of a company, or as a manager, a director, COO, CFO, you know, whatever it is of the company, there are sort of two levels that you’re looking at here. But you are beholden almost completely based off how the law interacts with companies today, to maximizing value for your stakeholders or your shareholders. And that can become pretty complicated when a company is trying to, quote unquote, do no harm.

Art Cavazos: Right. So I think that does kind of set the stage for our discussion today. You know, we wanted to get into a little bit of the history of corporate responsibility. There’s also corporate duties, which are a little bit different, but there is kind of a long history there. And I kind of also, you know, wanted to talk about how we got here and the history to also really focus in on the point that we have to remember that corporations didn’t always exist, you know, they were something that was created.

Erin Camp: By lawyers.

Art Cavazos: By lawyers. And there have been evolving theories over time as to what are these entities, like how do we treat them and recognize them? Under the law and in the economy, what sorts of rights do they have? What sorts of responsibilities and duties do they have? And then all of the different actors within those corporations, whether that’s shareholders, management, like directors and officers, other employees, customers, the community at large in which they operate, all of these different actors can have different rights responsibilities within the corporate framework. And going through the history, you can really see how we kind of made it up as we went along. Legal scholars, the courts, legislators, kind of worked out the framework that we kind of ended up with today. And we’ll talk about you know where we are today. But I think all of that context is just good to keep in mind so that we can kind of question from, you know, maybe an academic point of view, but then also thinking about, how do you put it into practice, we can question even the most basic assumptions.

Erin Camp: When corporations were first founded. And really, when we say corporations, we are including other business entities that have limited liability sort of protection. So LLCs can easily fall into this or limited liability partnerships. But to keep things simple, let’s focus on corporations. But the original corporation’s theory isn’t original business entities, they really were created to be the single unit enterprises where a group of investors could come together, they could raise funds without being personally liable for the business venture that they were pursuing. And over time, this has evolved in the corporation has evolved, or the business entity has evolved into many different things today considered legally a person.

Art Cavazos: Right. So there was the rise of the giant corporation, really in the 20th century. And so that was kind of a whole new animal, you know, like when we talk about kind of a startup company, it really is a very different animal from like a multinational gigantic corporation, or conglomerate, even treating those two types of entities, the same under the law is even questionable. Right. And there’s definitely legal scholarship out there that that draws distinctions in that way on like the size of the company and the number of employees and its reach, whether that’s international or not, so that you know, so that’s one way to draw lines. But where I kind of want to start here, is talking about the development of corporate law going back, just you know, that usually the case that’s first cited, it was a Supreme Court case, maybe you remember, Chief Justice John Marshall, he’s kind of that that famous, he actually wasn’t the first chief justice, but he’s apparently the most famous. And this case is one of the reasons why it was the Bank of United States versus Deveaux. And the corporation at question here was actually the Bank of the United States.

So some folks who aren’t lawyers might not even really think about the fact that the Bank of the United States is a corporation. So that’s one thing to think about. And at the time, the question was, can a corporation even sue somebody or be sued? Right, because it wasn’t established yet that a corporation was there was kind of a thinking in the law, that it was a separate entity, but the thought was that it was a fictional entity, meaning that it was really just an amalgamation of contracts. Right? It was, the employees had kind of contracted with the managers to show up for work. And the managers had kind of contracted with the investors to run the company for profit. And everybody kind of had made agreements among themselves. But the entity itself was a fiction. It wasn’t kind of a real, separate entity.

Erin Camp: Like a separate artificial being, I think, is the word they use.

Art Cavazos: Right. Right. But artificial, always, you know, it was it was clear that it was an artificial fictional entity. And then that changed, right. And so over time, back in 1809, when that case was decided, that was the viewpoint. By the time you get to the late 1800s, that had evolved into a different view, that they actually were these entities that were separate persons, and I think they really make that distinction in the late 19th century.

Yousef Kassim: Got a question real quick. Before that case, what would happen if there was somebody that was wronged by a corporation, or a corporation felt like they were wronged? Would it just be individuals suing one another?

Art Cavazos: Yeah, yeah. So they actually had a really interesting quote, that you could always look through the name to see and protect those whom the name represents. And so most often, actually, in this time period, they were more concerned with corporate rights, then corporate harms or responsibilities. So most of these cases, interestingly enough, were about protecting the rights of the corporate shareholders or managers. And so it was actually more about the way you framed the question. It was just typically framed in the reverse, which is, how could a corporation protect its rights? And how could it go out and kind of sue others? That’s usually the way that the question is framed in that time period.

Erin Camp: And I do think we only have just recently moved away from corporate rights as a focus. You know, I think once we gave corporations personhood, and, you know, made them a person under the law, which is how it stands today. We’ve already kind of established they have these rights. And now we’re sort of looking at corporate responsibility, but also kind of trying to determine did we go too far. Because I think a lot of scholars in this area would say, we have gone too far, you know, we’ve given them the right of free speech, through money, we’ve done a lot of things to make them people, but we haven’t done a lot of things to have them be as responsible as we expect people to be.

Yousef Kassim: What I was gonna say that it seems like, you know, in some instances, there are gaps in our ability to hold people responsible for corporate actions, where an individual maybe is not culpable for the actions of the corporation. And so we’re stuck holding the bag, and trying to understand, you know, whether the presence of the entity prevents folks who are responsible for the actions of the corporation from being held responsible.

Art Cavazos: And it definitely does it mean that, you know, probably the earliest reason, and still a fundamental reason for forming a corporation is limited liability, right. So it is fundamentally a vehicle for protection, where the managers, the shareholders, the owners, the employees can kind of use it as a shield from liability and, you know, go out and take risks and do things that may end up causing harm, and then not be held personally liable for it. It is fundamentally, some might say, a feature, and not a bug. But like Erin was saying, and you were alluding to, maybe it’s gone too far, and maybe there is a time to dial it back.

Erin Camp: And I do think we have reduced who is considered a stakeholder and able to sue so much that we have made it very hard to, if it is a bad actor, say like on the board of directors, we’ve made it very hard to quote unquote, pierce the corporate veil and get around that limited liability. So basically, yeah, have we gone too far?

Art Cavazos: Yeah, which is a huge shift. You know, like we said, at the top, you know, the way that we now do things doesn’t necessarily mean that that’s the only way to do it, or that it’s the correct way to do it. And so, for example, going back to that early case, in 1809, and actually, even all the way until 1886, was the Santa Clara County case, where the Court said, the courts will always look through, you know, essentially pierce the corporate veil, and see, you know, the folks behind it. So that was the thinking at one time. But by the time we got to the 20th century, and we’ve kind of created this personhood for corporations, and they are established as having more and more rights. That was kind of the progression through the early 20th century, you do end up where we are now that it’s very difficult to pierce the corporate veil. And so that is almost like a 180 shift, you know, that occurred.

Erin Camp: Yeah. And over time, even though we’ve increased the rights that corporations have. And I think this also dovetails nicely into what we want to talk about, as we continue to give rights to corporations. And we have created this personhood concept of corporations. We’ve only really looked at one side of the equation. And not like I said earlier, we haven’t we’ve given them all these rights, but we haven’t really assessed what their responsibilities are. And in fact, although we’ve brought in their rights, we’ve limited what their responsibilities are. And we’ve limited it so much that we’ve been teaching people in schools that you have to do this. And we’ve been saying it’s how it’s done. But it’s just it’s not really codified. This is as Art keeps saying, that’s just how it’s done. We have just completely narrowed it to where the only responsibility that a corporation has is to its shareholders. And beyond that to maximize the value of the company for the shareholders.

Art Cavazos: Right. So yeah, so let’s talk about that a little bit. So, you know, we’re now in the 20th century corporations have personhood they have all these rights. And best expressed by and often associated with Milton Friedman, is this idea that Erin was just talking about, that corporate managers are purely agents of the stockholders. So, you know, the directors and, you know, to some extent the officers and other employees are really there to just be agents of the shareholders. And not only that, so not only have we narrowed the constituency down to purely the owners and the shareholders, but also really the only interest of the shareholders that needs to be served is the maximization of value. So it’s not taking like a holistic view of these shareholder interests. It’s taking a very narrow view of a very narrow constituency, within the corporation. And so, you know, just to get put a little color on that. So in 1970, you know, Milton Friedman wrote an article for The New York Times, it was called The Social Responsibility of Business Is To Increase Its Profits. Pretty clear headline there. And then, you know, in one of his books, he talked about specifically, that this idea that corporate officials have a social responsibility that goes beyond serving the interests of their stockholders was just flat out wrong. And that is their only social responsibility is to their shareholders. So he really kind of epitomizes and kind of sums up I think that viewpoint the most, and that was in the 1960s and 70s. And I think that that has continued to dominate the thinking, whether you’re talking about from a legal perspective, or from kind of a public perception and opinion, perspective.

Erin Camp: Yeah, I mean, even how you classify corporations, there’s for profit or nonprofit, I mean, they exist for profit. But keep in mind, this isn’t like a codified aspect about what a corporation is, it’s just something that in practice we’ve been doing, since Friedman said that, and we just haven’t stopped. And we’ve taught it as being what corporations are there for. But we just haven’t really dove in to assess whether at with the modern corporation, that’s really a good idea, or a corporation that’s considered a person is that really a good idea? That goes back to what we were talking about, at the beginning of this, or what Yousef said about, you know, trying to do no harm, that becomes increasingly challenging. And I think one easy thing to point out that the corporate world is sort of talking about now is the environment. A lot of corporations, and a lot of CEOs, particularly Larry Fink, the CEO of Blackrock has been pointed out that, at some point, if we don’t look at the long term, and we don’t take the public benefit being the environment into consideration, there won’t be consumers to consume, there won’t be profit to be had, or to be made, there won’t be valued to be made. So at some point, it seems like we do both pragmatically, and just ethically need to start thinking about other things than just profit.

Yousef Kassim: Totally agree. But also, you know, just thinking about the time when Friedman said that pre tech companies that we know today, so companies like Amazon that can go decades, without showing a profit, but still communicating value, still increasing the value of their shares. So I think, in the past, maybe we didn’t see a lot of companies like that would forego profit, or more, you know, long term value, trying to look at the sustainability of a business as opposed to the short-term profits.

Art Cavazos: You know, it all brings up a great point about shareholder value. And, you know, a lot of it is perspective, right? Because you’re talking about the long-term value. And you were talking about the environment. And, you know, that essentially, also is kind of a long-term value argument where, you know, if you take a long enough view, if you kind of have the right perspective, then it is in the interest of the shareholders, for you to do these things. But that’s not where we are, you know, where we have been, is kind of a very short-term view of increasing stock value, you know, almost like on a quarterly basis has been kind of the norm. It’s where, you know, you need to be increasing stock value each quarter, and that’s kind of the end all and be all.

Erin Camp: And its dollar, it’s a dollar figure, you know, I mean, your accountants are telling you whether or not you’re increasing the value, it’s, it’s totally based off profit, but profit of a company or even just like the revenue of the company, doesn’t really indicate whether or not there is an increase in value. If you look at these other aspects.

Art Cavazos: And it’s interesting that if you kind of take a very narrow short term view You, you can also easily kind of juice the numbers. And one of the one of the, I think, most prolific ways that this is done throughout corporate America and throughout the world, is by externalizing costs, right. So like, if you can externalize costs onto the public, you can essentially impose costs on the environment, impose costs on customers, if you can utilize low wage labor, which imposes costs on the community, because if you’re not paying your workers enough, then they’re going to need welfare and other means to support them. So you’re not really supporting your own.

Erin Camp: Providing health care.

Art Cavazos: Providing health care. So like, all of these are examples of ways that companies have been able to externalize costs that maybe they really should be taking into account. And they would look much less profitable if they had to actually take into account all of those costs. And so it’s been a very attractive and successful strategy, I think, for a lot of companies for a long time, is to kind of push those costs off onto society. And, then just, their numbers look that much better.

Erin Camp: That just kind of makes me think about the whole, like, movement from providing employee pensions to the 401k. I mean, that all was done so they could save money. And it’s, you know, it made like a certain retirement, or something that was like a for sure, like, I’m going to retire with, you know, a savings and a pension. To well, no, I’m just going to put a portion of my paycheck into the market. And it’s just going to be invested, how my firm’s investment advisor is going to put it in there. And hopefully, you know, I can take it out at a good time of the market. I mean, that is a very deliberate example of corporations, offsetting costs and putting it all out on to the public.

Yousef Kassim: Perhaps that’s one of the major reasons why folks jump around so much in their career today, whereas in the past, they may have been more loyal to one corporation. Yeah, folks don’t stick around to jobs as much as they used to.

Erin Camp: It’s interesting, because I really do think you know, what Art was saying about the short-term costs, we are just really focusing and teaching business professionals to focus on that short term cost, and not look at the long term. I mean, there are, there is a lot of value to having the same employee for years, there is a lot of value to treating your employees well, so that they stay there for a long time. But somewhere down the road, a lot of these large corporations did a cost benefit analysis, and they decided that it would be cheaper to train someone new, that they could pay less than to keep someone on for 30 years.

Yousef Kassim: I disagree. I mean, it’s very difficult to train folks. It’s very expensive to train folks. So when you lose somebody, it’s a hit. You want to do everything you can to not only attract but retain top talent.

Erin Camp: Do you as a business owner? Because it’s clear to me that you do look at the long, long term too. And the short term, do you have other companies that are really competitive in your space? Because I know your company is like very novel. So I guess that’s the first question, do you have like direct competitors?

Yousef Kassim: Attorneys. We compete against attorneys, for the most part.

Erin Camp: So maybe your company isn’t the best do this analysis. But do you think just like, as a CEO of a company, it makes it harder to compete, having that long term view, instead of just sticking to the short-term view that your competitor might be looking at?

Yousef Kassim: Well, there’s tons of considerations, and there’s tons of pressure, you know, coming in short term and long term, right? They’re things that people want to see, in order to allow you to persist, you know, and so we have milestones that we need to achieve, we have things that we need to report on. And if we’re successful, and we’re doing the right thing, then our investors will continue to double down on our efforts. And so there is a lot of that, you know, short term pressure to deliver, but with respect to, you know, long-term thinking for us, we know the cost of losing a talented person. And so, for us, we’re always trying to be mindful about creating an environment where folks want to come to work, where they feel valued, where they feel like the work that they’re doing is meaningful, that they have an ability to move up within the company. And that could also mean you know, increased responsibilities. So yeah, it’s something I’m really proud of. Most of our employees have been around for several years.

Art Cavazos: So I think that’s actually a really good segue…

Yousef Kassim: We’re a young company. So several years is not a long time.

Erin Camp: I mean, how long have been around? How many years now?

Yousef Kassim: Yeah. Seven years. And I have, you know, with the exception of the, you know, 10 employees that we brought in over the last year. I think, on average, our employees have been here for four and a half, five years.

Erin Camp: Wow.

Art Cavazos: Yeah, that’s great.

Yousef Kassim: Yeah. Some employees that have been here from the beginning.

Art Cavazos: So I think this is a good segue, though, into a topic that I know is near and dear to Erin’s heart, and that is fiduciary duties. Because the way I see it, and Erin’s gonna correct me if I’m wrong, for a lot of corporations, even if they really want to do things that benefit their employees, make their employees lives better benefit their customers, like not just in a way that gets them to buy more, but actually delivers like maybe a better quality product just because they can. And you can make that long term argument that you deliver better quality part, and the customer is going to be loyal. And then you can make the business case for it. Right. But I’m also just saying, let’s just assume that a company wants to do something that’s genuinely…

Erin Camp: What if its better quality, because it’s like, reusable and not disposable. I think that might be an example that, but so it says it, there’s no, there’s not really an argument that it’d be more profitable. It’s just like the better thing to do for the product.

Art Cavazos: Exactly, exactly. I want to talk, I want to talk about hypothetical where they’re doing something for the employee for the customer that isn’t necessarily more profitable, that isn’t necessarily going to maximize shareholder value. So right now, the way I understand it is fiduciary duties would actually prohibit a director or an officer from making that type of decision. They would not be able to do something that’s kind of beneficial to the community, or to the workers or to the customers, if it’s at the expense of shareholder value.

Erin Camp: Yeah, no, I think that’s completely I think that’s completely true. I mean, so when you’re talking about any of these things, you’re obviously also talking about like whether or not they could be liable for those decisions. But let’s put that out of, you know, out of the way. But I think that’s, that’s definitely true, I think, technically, they would not be able to make those decisions, or make those calls if shareholder value or the value of the company is lessen at the shareholder’s expense.

Yousef Kassim: Right. And, you know, I think it probably is worth considering what stage a company is at. You know, one thing that really resonated with me was I listened to a Brian Chesky speak one time about the founder of Airbnb, and I’m paraphrasing, but, you know, he talked about, at the very early stages of a startup, one of the most important things you can do is get 100 customers who are just absolutely delighted. That you didn’t just get 100 customers, you didn’t just get 100 customers that are pleased or happy with what’s going on but are willing to tell their friends and shout it from the rooftops that, you know, I really love this company, you know. And once you’ve done that, you’ve collected enough information that you can really understand how to deliver this at scale for a lot more people. And he, you know, some of the examples that he uses that, you know, obviously, are not very scalable.

He said, when we first started, and we had, you know, folks signing up in New York, and I was in California, we didn’t have a cameraman. And we noticed that the listings that had professional pictures, as opposed to the ones where somebody took it themselves, we’re doing a lot better. And so we wanted all the listings to have access to a professional photographer, he didn’t have one than and so I would, you know, Brian Chesky, said I’d go to these apartments, and I would take the pictures. And to have the CEO of the company, going and taking pictures of their apartments, doesn’t seem like a good use of the company’s time or of the CEOs time. But, you know, it seemed like he was using it more for R&D. And when looked at from that lens, provided a tremendous amount of value that, you know, something that wasn’t very scalable at the beginning, you know, informed something that was much more scalable later. I think, thinking about what stage your company is at is critical.

Art Cavazos: Yeah, I think that’s absolutely true. And, you know, just as a question, I just, I just wonder, I mean, from like a framework perspective, you said, the paradigm we have right now is that we have to maximize shareholder value, right? That’s, that’s the Milton Friedman paradigm that we live in right now. Do we need to change that framework in order to like, if we want a functional behavioral change from corporations, we want them to actually be taking care of the environment, taking care of the population in a way that is sustainable, right? So if you’re making a profit, you’re doing it on kind of a net positive basis that is going to be sustainable over time, right? If that’s the functional kind of behavioral change that we want to see, is that accomplishable under the Milton Friedman framework, can you, can you make a business case for it that you’re maximizing shareholder value? If you kind of take the right long-term perspective? Or do we need that framework to fall? Do we need to change that framework and say, no, the corporation has responsibilities beyond maximizing shareholder wealth, it actually does have a responsibility to the public, it has a responsibility to the environment, it has a responsibility to its employees.

Erin Camp: I think, in the current framework, it’s not impossible for a company to take into consideration public benefit. And, you know, there’s, there’s all kinds of facets to like, there’s the business judgment rule that kind of goes along with the judiciary duties of the board of directors and all those kinds of things to where everything sort of leans and is deferential towards, you know, the people making decisions at the corporate level, but so they do kind of get this deference that whatever they do, they are doing for to maximize the value of the company. With that in mind, there are ways to make those decisions within the framework. However, if we’re going to create a framework where we want to, this sounds bad but, force companies to look at the public, or take some responsibility for how they affect the public or do some sort of public benefit. If we want to enforce that if we want to make sure that corporations are doing that, because I do think we are at a point where we do need to start holding corporations responsible for how they are affecting the public. If we’re going to do that, then we yes have to change the framework, the amount we have to change the framework, I think is really up for discussion. But the issue with the framework is we can’t hold a company accountable or enforce or force them to take into account some sort of public good or public benefit with what they’re doing.

Art Cavazos: Right. And it might even run counter to their current fiduciary duties to do so.

Erin Camp: Right. I mean, I think it arguably, more often than not, does mean it’s always more expensive to be sustainable.

Yousef Kassim: I think it’s perspective. I mean, it’s an investment. I think, you know, certainly there’s some marketing appeal to some of these initiatives that on their face might seem wasteful when just considering, you know, maximizing shareholder value trying to increase your profits. But I think there’s certainly a value from a marketing perspective, I think that today, more than any other time, in the past consumers are more considerate of the impact that a corporation has, and they have more of an ability to take action, including going to a competitor, you know, electing not to purchase from a company that maybe doesn’t reflect the type values that you know, that consumer has. And so I think consumers have a lot of power today that they didn’t have in the past, they have a lot of choices. And companies are aware of that. I remember one of the first rules of one of my business classes was, you know, if you have a boycott that your company is facing, you know, engaging with the boycotters, and trying to understand why it is that folks who are upset, because the longer that drags out, the more that costs your company, I think it’s more true today than it’s ever been.

Erin Camp: That’s a really good point, because and I think that gets to the heart of what we were saying about value being more than just profit, it can be accounted for so many ways. And so you know, maybe one of the ways that this framework changes is starting to think about value and shareholder value different. Traditionally, the thought is that a shareholder buys into a company, they’re going to be profitable with this investment because traditionally they’d be receiving like dividends. And those dividends were of the profit of the company that they weren’t going to reinvest. That is just not what happens anymore. Shareholders very rarely receive dividends. That’s not how they expect to receive a profit. If they invest in a company. They are really expecting to receive a profit when they’re bought out, or when there’s some sort of event in the future with the company. Art, actually was the last podcast that he mentioned SAFES, never mind, I take that back.

Art Cavazos: We talked about SAFES from time to time on this podcast.

Erin Camp: Okay, well, like SAFES. But people don’t really invest in a company anymore thinking like, I’m going to get rich from this company, because of the dividends I’m going to receive, they think I’m going to get rich, because it’s gonna be a good investment. And when I sell this, I’m going to sell it for a profit, or when there’s a corporate event, I’m going to make out because I invested and they’re going to pay me this multiple on my equity. That’s just not how shareholders interact with companies today. And you know, there’s a lot of issues with that. That’s arguably one of the reasons why CEOs are paid so much today, because where does the profit go? It’s going to go with the person that’s making the decisions about where the profit goes. But no offense Yousef’s not that kind of CEO. It’s just, you know, it’s antiquated, to think of value as profit, and to think of value to shareholders as profit, because there is so many more aspects to it, like Yousef was saying.

Art Cavazos: Well, it’s funny you say that, and I just want to say this real quick, because you said that it’s antiquated. So to bring it full circle, so there was actually in the early 20th century, a more holistic view of shareholder interests. And, you know, Berle of, you know, corporate law, only corporate lawyers would know who Berle means are. But Adolf Berle, you know, was a big proponent of that in the early 20th century, you know, about 100 years ago, that the interests of the shareholders kind of served as a proxy for the community, right. And so in his view, in his framework, maximizing shareholder value, had a much broader kind of holistic viewpoint. And then it was really over time, that it evolved into the Milton Friedman framework where it became a very, so Berle, kind of there was a debate going on back then Berle kind of won the debate that, that it’s all about maximizing shareholder value. But it was only later turned into this very narrow conception of maximizing shareholder wealth or, you know, we’ve been saying profits, but you know, it’s essentially this idea that you’re increasing the monetary value for the shareholder.

Yousef Kassim: Well, I was gonna comment on, you know, companies that issue dividends, are signaling something when they do that. You know, if you had something to do with that money, that creates value, you would do it, instead of just issuing a dividend. And so that’s why a lot of companies today choose to reinvest, as they say, we do have things that we can do that add value, still, we’re not done. We’re going to take that money and go reinvest. And then I wanted to make a quick point also about looking at how sensitive corporations are today, to their image online. And look at the power that consumers have today, with being able to address a grievance they might have with a company online, a lot quicker than maybe taking this to the courts, maybe they wouldn’t have had the resources in the past. But corporations today will respond to somebody who puts a bad review online. And oftentimes, the response that they’ll provide is maybe giving a full refund or providing additional services or, you know, something of value to that consumer, because they’re concerned about their reputation online, maybe in the past customer would call a corporation with a complaint. And it might not have been taken as seriously as it would today.

Art Cavazos: There was no visibility, you know, they could just snub that customer and…

Yousef Kassim: Go kick rocks.

Art Cavazos: And nobody would ever know.

Yousef Kassim: Yep, yep.

Erin Camp: And I think that’s really important to emphasize, too, because the power does lie with us as consumers. And as a corporate attorney, I really do feel that we have gone too far on one side, just like I just don’t think we are holding corporations accountable. From like, a social responsibility standpoint, we just I really do think that needs to change. And it’s not going to change until the consumers demand that change. Because I mean, at the heart of it, corporations, I mean, we do have this list of like the wealthiest individuals in the world, but the wealthiest people in the world are all companies. They’re what’s really empower. And so, it does increase become increasingly important to hold them responsible and use the avenues that we have. Like Twitter.

Art Cavazos: They’re also immortal.

Erin Camp: They’re also immortal, that’s true.

Art Cavazos: They’re all-powerful immortal overlords. Okay, so on that note.

Erin Camp: That was really dark.

Art Cavazos: On that note, I think we should, should wrap up for today. But it’s exciting because I think this is really just the first of a recurring series on this topic, because I think there’s a lot more to talk about, you know, we didn’t even get into. So I think there’s a lot of different ways that this could be addressed. And what I’m excited to continue the conversation about is all of those different ways on how this could be addressed and start to come to some kind of formulation on, you know, maybe what is what is the best way to address it, you know, because there’s been a lot of different approaches, we can talk about next time. Like something called progressive corporate law, where it is a re-imagining of the framework and saying, you know, corporations actually do have responsibilities to the public, they are entities that should be looked at as more like public trustees, you know. Where, if we’re going to entrust them with all of these assets, and all of this power, and etc., they really need to have obligations to society, to exercise that power for all of our benefit, you know. So, so there are ways to, you know, rethink the framework. Yousef, as you mentioned, maybe we don’t need to fix the framework or change the framework. Maybe the market can move in that direction, with the power of consumers kind of voting with their dollar voting with their feet type of thing. So there’s, there’s a lot of different ways to approach it. And you know, we’ll continue talking about that in future episodes.

Erin Camp: Yeah. And not only is this a recurring topic, but I think Yousef might be a recurring guest if he wants to come back.

Art Cavazos: So thank you, everyone, for joining us on this episode of Future Ready Business. We touched on a lot of things today regarding corporate law and duties and responsibilities of corporations. And over the course of this podcast, we’ll continue talking about that and many other topics.

Erin Camp: Yes, such as Cryptocurrency startup companies, legal automation, fashion, music, the list goes on.

Art Cavazos: It’s exciting. So if you liked the show, please rate and review us wherever you listen to your favorite podcasts and share feature at business with your friends and colleagues.

Erin Camp: We would like to thank our guest today, Yousef Kassim of Easy Expunctions and we look forward to you join us again soon.

Yousef Kassim: Thanks for having me on. I look forward to it as well.

Erin Camp: If you’d like to reach out to us with a comment or any feedback on our show. You can find me on Twitter at @BusinessLawyerE. E for Erin.

Art Cavazos: And you can find me on Twitter at @FinanceLawyer. Yousef anywhere folks can find you on the internet.

Yousef Kassim: Yep, I’m on Twitter at @YKassim. My first initial last name KASSIM or at @EasyExpunctions.

Art Cavazos: Very nice.

Erin Camp: Awesome. And I’d also like to thank our producer Greg, on the ones and twos.

Art Cavazos: And our theme music was provided by me. Thank you, me.

Erin Camp: We’ll see you next time.

Art Cavazos: Goodbye everybody.

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