Thursday, March 25, 2010

Securities Regulatory Reform

(I do not think this is a repeat but...apologies if some of it is...also I need to figure out how to use end notes on Blogger!!!!)

Regulation raises questions: is it good or bad, an obstacle to social progress? While securities industry financial reform is still a proposal in the United States, there is time yet for reflection on how best to reform securities regulation. There are two concepts that should be part of the reform dialogue, one is education and the other is responsibility.

Education of everyday participants in the economy should be required in an financial reform anticipated in the US. It is hubris not to include a heavy dose of education. As discussed above, regulators worldwide think investor education is important for a healthy market. Investor education must encompass more than an effort to build confidence in the markets—it must actually inform the investor. It is heartening to note that IOSCO and the International Forum for Investor Education (“IFIE”) have already organized a conference to address global standards for investor education. While the IFIE only began in 2005 and only 125 people were invited to attend, the conference goals were encouragingly ambitious, and necessary. The speaker list included educators from around the globe, including Africa. This is a good beginning because it is an example of how responsible regulators must think. This type of responsible forward thinking must inform our regulatory reform.

Responsibility of Care

There is a tendency in the West, to talk about capitalism- of which stock exchanges are the bell weather- as non-moral while all the time the morality is implicit. Taking responsibility for ones actions is a moral act and not one that international financial actors are accustomed with. But that does not prevent us from considering moral responsibility as part of the inevitable financial reform. Financial reformers will be better able to provide prudent legislation by considering the crisis through a lens of ethical responsibility owed by businesses involved.

As legislators contemplate how to reform financial regulations, and education, they need to consider making financial actors more responsible. Borrowing from concepts of Corporate Social Responsibility, the relationship between business and society, whether global or domestic, is permeated by ethical values. Business ethics includes social responsibility owed by companies and corporations as they interact with one another and individuals. John Rawls argued that rational persons enter into terms of association based on principles of fairness or justice, as opposed to a social contract. All persons are “similarly situated” so that no one has the upper hand in deciding their own moral fate, as opposed to how they treat others. The association garners its equality from a hypothetical ignorance of one’s own advantages and qualities. Corporations and business must consider these concepts from a global perspective.

Corporate Social Responsibility is not the only paradigm we can utilize. Self-regulation within industries can develop into industrial morality. Within the self-regulated industry there develops a responsibility to consider not only what is good for the members of the industry, and what is best for society in general. Eventually, responsibility becomes institutionalized and, when making decisions, like a moral individual, the industry will reflect on the consequences of various choices. Similar to the concept of sustainability, one of the Millennium Development Goals (“MDG”), actors in the securities industry can be incentivized through regulation to consider what is best for the common good.

Securities regulation was not at the heart of the GFC, banking regulation was. The White Paper however contains securities related reforms. The securities industry will be changed along with the banking industry by the inevitable legislative reforms. Now is the opportunity to explore the full extent of helpful securities regulatory reform. Africa does far afield from this discourse but our securities industry, through our government machinery, is involved. We need to realize that. We also need to appreciate that a global financial community exists and along with it comes responsibility. As far as the effect of the GFC on East African exchanges, since the beginning of the crisis, Kenya, Uganda, and Tanzania have postponed bond issues on international exchanges. External financing is no longer available, so African regional integration projects have stopped. The African Development Bank has, to the extent it is capable, attempted to co-finance projects. Participating in the global financial community has its risks and benefits. There are advantages to liberalized capital markets, such as the possible establishment of international standards, an increase in transparency and accountability, and potential increases in domestic competition and economic growth.

The situation in Africa illustrates the fact that liberalization exposes the economy to potential outflows of capital causing economic contraction and hardship. The question then arises whether the benefits of liberalization are outweighed by the costs—in human terms. At the same time, discussion of the GFC is not limited to economic or legal frameworks; there is an education framework. We in developed financial systems can learn from East Africa to include more education in our securities regulation regime. Additionally, there are ethical dimensions to the crisis. The consequences of risk-taking by bankers and investment professionals, namely the GFC and the global recession, were catastrophic worldwide. Regulatory reform is inevitable in the developed world in light of how devastating the effects of the GFC have been there. To be effective any reform should be guided by an understanding of the ethical responsibilities inherent in making decisions that have the potential for such dire consequences.


Rebuilding Investor Confidence: IOSCO and IFIE Hold Major Investor Education Conference.... REUTERS, Jan. 12, 2009,

Press Release, Int’l Forum for Investor Educ. & Int’l Org. Of Sec. Commissions, More than 100 of the World’s Investor Education Leaders to Attend IOSCO/IFIE Conference in Washington, D.C. (2009), available at The goal of the conference was to gather capital market experts and provide attendees information needed to start investor education programs. Id.

Id. BothAllen Rwakakooko from Uganda and an official from the CMA in Egypt were invited to speak. Id.

James Ferguson, GLOBAL SHADOWS: AFRICA IN THE NEOLIBERAL WORLD ORDER, 80-88 (2007).(discussing structural adjustment programmes imposed by the World Bank and IMF on borrower African nations)
Id at 86.
Antonion Argandona, Can Corporate Social Responsibility Help Us Understand the Credit Crisis 10 (IESE Business School, Working Paper No. WP-790, 2009).

This Article assumes that the reader is familiar with the causes of the financial crisis as well as the responsible actors such as credit rating agencies, mortgage lenders and banks. See generally, MARTIN BAILY, ROBERT LITAN, AND MATTHEW JOHNSON, BROOKINGS INST., THE ORIGINS OF THE FINANCIAL CRISIS, (2008) (explaining the causes of the financial crisis).

See Elisabet Garriga & Domènec Melé, Corporate Social Responsibility Theories: Mapping the Territory, 53 J. BUS. ETHICS 51, passim ( 2004).


John Rawls, A Theory of Justice, in AN INTRODUCTION TO BUSINESS ETHICS 214 (GEORGE D. Chryssides & John H. Kaler eds., 1993).

See Karen Ellis, Is CSR just Corporates saying the Right Things?, OVERSEAS DEV. INST. 100, 100 (2008), available at

Neil Gunningham & Joseph Rees, Industry Self-Regulation: An Institutional Perspective, 19 LAW & POL’Y, 363, 276 (1997).

Id. at 378.

Id. at 381-82.

African Development Bank, Africa and the Financial Crisis: An Agenda for Action, Policy Briefs on the Financial Crisis, No. 13 (2009).

Id. at 3.

Id. at 4.

See Paul Olivera, Investment Including Capital Movement, INT’L TRADE L. & REG., at 40 (2009).

Id. at 44.

Tuesday, March 23, 2010

Bitter Blog post

I really think that there is this tricky game you must play in law and academics and it is not pretty. I know I can write but playing THAT game, working at a University, is another thing all together. You cannot have a minority view. If you do, then you are marginalised. (This is not code for the healthcare bill. I have not been following that.) This is about teaching and university positions and publication.

I just mean to say, that you need to work hard to get your minority position 'outed' so to speak. That is a job all by itself.

I soon attend the Law and Society meeting, this time in Chicago--the town of my birth. Will I espouse my minority viewpoint.....hell yeah. Does it matter? Well, sort of. My analogy is District 9.

No one understood the movie...including me most probably....but it is out there. Unlike my journal article on East African Securities law which has hit all sorts of snags. I honestly believe what I say is not very popular in America. I am trying to inform my people but it is not received very well.

This bitter blog is to say, intellectual life in the fringe is isolated but not lonely.

Friday, March 19, 2010

What must be done about past harms?

Many of the new laws and policies in Zimbabwe are (in their best light) an attempt to rectify past harms. In fact, much of the discourse about justice in Africa concerns compensation for past harms. Simplistically, the idea is that imperialism, invasion and exploitation harmed much (all) of the developing world. Independence of these nations ended that harm. However, the harm continues because years of dominance deprived indigenous populations of an opportunity to educate themselves, gain work experience and become middle-class rather than rural poor-this is the continuing harm that deprivation caused by oppression causes. Countries all over the world have attempted to compensate oppressed peoples of all kinds for harms caused to them from a dominant majority. It continues to this day. Does any of it make any sense?? There are real problems with attempts to pay for past ‘mistakes’ or oppression.

Firstly, many reparations schemes cannot hope to realistically address a continuing harm when the oppression lasted over many years, nay centuries in some cases. The law cannot always design programs that extensive. Laws can do simple things like pay money, even over time, but it cannot right vast wrongs. I belive Society needs to do that. Its continuing harm. If you start someone off wrong it can be nigh impossible to set that right. Just ask anyone with kids. You must do something drastic and it usually involves you changing as well.

Secondly, reparations schemes sometimes lack finality. Just look at Truth and Reconciliation (not exactly reparations per se) in South Africa. The multinational corporations never participated and now we have suits in American courts over things that took place way down there.

Historically reparations schemes worldwide some were predominantly for war related harms such as: France paying Germany for reparations after the Franco-Prussian Was of 1872, Holocaust reparations paid by West Germany after World War II, Iraq reparations for the Gulf War. In the US, Native American Indian reparations take the form of Indian gaming laws on reservations (Indian land) as well as Japanese American World War 2 internment reparations, Hawaiian Annexation reparations and there are some more on the list. Some of these programs have their critics. Indian gaming rights has not reduced poverty or significantly contributed to better education on reservations. It has, however, forced some tribes to give up power in order to exercise their federal right to allow gambling on reservations-kinds of a step backwards rather than forward. (See Naomi Mezey, Note: The Distribution of Wealth, Sovereignty, and Culture through Indian Gaming) What the US has never approved of are reparations to African-American for slavery and the continuing harm this causes to the African-American community in the US. A critical legal scholar argues that a dominant perspective frequently causes those included in the dominant culture –members of the class that exerts economic and ideological control over a society—to minimise the need for reparations.

The ‘other’ perspective is the oppressed. Under this rubric we each will frequently only understand reparations from our separate perspective and not from the other perspective. This is a problem for the oppressed who never have others see their point of view. (see Vincene Verdun, If the shoe fits wear it: an Analysis of reparations to African Americans, 67 Tul L Rev 597, 610, 1993) The majority does not understand the concept of a continuing harm and want African Americans, for example, to just get on with it and give up the pursuit for reparations. However, there is an entirely different viewpoint which is that of the African American, in this example. The other viewpoint is not that of American individualism and limitations on liability. It is the viewpoint of the continuing harm that cannot rise above the detritus of the oppression because it is pervasive.

And what about all the other genocides and atrocities world wide whose victims never saw reparations—such as the raping of Nanking along with the other terrible things the Japanese did in mainland China before the outbreak of WW2?? No one will ever be compensated for any of those horrific events. What can we do about that? Apparently not much and maybe because we don’t feel guilty enough. Judith Butler a feminist scholar has argued that we even consider some lives worth grieving for and others-not so much (see Judith Butler, Frames of War: When is life grievable? 36 (2009))

I do believe the Indigenisation law in Zimbabwe uses a similar argument to support itself. The argument is that there is a harm that cannot be rectified by cash payment-rather the payment must be in kind. Companies doing business in Zim must be owned by indigenous Zimbabweans. This is one creative way to rectify and remedy a past harm which is the oppression of blacks. We could not have something similar in the US because of our Constitution. While some Justices of the Supreme Court have argued that the Equal Protection clause of the Constitution is colour blind*, the simple fact is that a law can be passed that is strictly based on race but if challenged it would face the strict scrutiny test, which asks if the legislation is based on a compelling governmental interest and narrowly tailored to achieve that interest. What is the governmental interest in Zimbabwe that allows for the Indigenisation law ?

I think the main difference between most of the reparation schemes I know about and the Indigenisation law in Zim, is that most reparations schemes are designed with the idea that there will be continued interaction between the peoples who are currently resolving past harm issues. In Zim, the Indigenisation programme is corrective justice but on a societal level. Somehow these plans force out the white majority rather than work together with them. Furthermore, since foreign owned firms are also affected by the indigenisation empowerment programme, this law will reach beyond its borders.

If we agree with the critical legal academe that there is a dominant view, then many will criticise the indigenous empowerment programmes in Zim but only because they cannot see the other side. It is possible, for arguments sake, they these schemes are not so wrongheaded. Certainly, the US has not really been able to get things 'right' with the Native American Indians. Also, concepts of constitutional law have prevented us from providing reparations to certain groups who suffered great harm.

Ultimately, what must be determined is whether these laws are effective in achieving what they say they desire-black empowerment across the country--and not simply enriching a few.

See Eric Posner, Adrian Vermeule, Reparations for slavery and other historical injustices, 103 Columbia L Rev 689 (2003)

*Adarand Constructor, Inc v. Pena, 515 US 200, 239 (1995)

Wednesday, March 10, 2010

Indigenisation laws, Apartheid and the Alien Tort Claims Act

On April 15 2010 all companies in Zimbabwe are required, under the new Indigenisation and Economic Empowerment Act, to provide an indigenisation implementation plan to the government. Indigenisation means that 51% of shares in all companies with asset values over $500,000 must be owned by indigenous Zimbabweans. The law discriminates based on race. However, they function as an affirmative action plan which intends to advance the interests of people who were previously discriminated against. Much like the land reform programme this new scheme will compensate for years of discrimination under white rule in Zimbabwe.

The United States has decades of experience with affirmative action programmes for example the Civil Rights Act of 1964 prohibiting discrimination based on race in a program or activity that receives federal funding. Additionally, South Africa has implemented the Broad Based Black Economic Empowerment Act to remedy past discrimination there. All of these programmes have their critics. Often only specific groups or people benefit from them. Also, the dominant group that is now excluded from preferential treatment-feel s mistreated. Indeed, the State of California passed Proposition 209 in 1996. This initiative amended the California Constitution and prohibited public institutions from considering race, gender or ethnicity for public employment, education or contracting. In 2009, the US Supreme Court held that the city of New Haven Connecticut committed reverse discrimination by failing to promote white fire-fighters who performed well on an exam, in order to promote minority fire-fighters. See Ricci v. DeStefano, 557 US (2009).

All the Indigenisation law in Zimbabwe does is exactly what all the other affirmative action laws worldwide do. Is it possible however that the SADC tribunal ruling finding the land programme in Zimbabwe illegal and now registered in South Africa could set a legal precedent for companies seeking to defeat the Indigenisation law? A company, who felt discriminated against under the new Indigenisation law, would need to sue the government of Zimbabwe under a SADC tribunal and receive a favourable judgment. The question is how likely is the government of Zim going to participate in such a process? Not likely at all given previous results and Zim’s demonstrated defiance for unfavourable SADC policies. Also, it is possible that corporations do not have standing to claim discrimination.

In the US, a corporation may sue for racial discrimination. There are many cases in this area but I will focus on a recent case from the Ninth Circuit. The court held in Thinket Ink Information Resources, Inc. v. Sun Microsystems, Inc., No.02-16754 (9th Cir. May 17, 2004) that when a corporation has a racial identity it can then sue for discrimination. The corporation in question was a minority owned business. The case essentially holds that while a corporation has to protect its employee’s civil rights it can also sue for violation of the corporation’s civil rights. Of course, this right may not be available for companies under Zimbabwe law.

Perhaps Zim companies could sue in South Africa or maybe even in the US. The Alien Tort Claims Act (ATCA) is the new way to gain access to US courts. All you need to show is a violation of a norm of international law under the colour of state authority and you need to be an alien. See Kadic v. Karadzic Certainly freedom from racial discrimination, if that is what the Indigenisation law is, is a human right. The African Charter on Human Rights for Africa and the Convention on the Elimination of all forms of Racial Discrimination say so. The ATCA will be further defined by the decision in the Second Circuit Court of Appeals this year. The plaintiffs are the human rights organisation Khulumani Support Group who is suing multinational corporations operating in South Africa. If claimants are successful, there will be a new kind of corporate responsibility that multinational corporations will need to embrace and it will be distinctly political. Corporations will need to become more sensitive to government policies when they do business around the world. Just like affirmative action these new responsibilities will have benefits and burdens.

It just makes me wonder if some of this legal activity might develop precedents that are unexpected. If laws develop that ask corporations to act more like people in a global community then corporations might start asking for people rights as well.

Where does this leave the companies in Zimbabwe? While Americans are filing their tax forms before midnight on 15 April, companies in Zim will be filing some forms of their own. Discrimination is bad and bad things happen when there is a lack of equality. The Indigenisation law is here to stay and it might help to include a previously excluded population in the business of Zimbabwe. It might help train a new generation of skilled workers. Unfortunately, affirmative action programmes have never been that simple in the US, or elsewhere for that matter. In general, law, all law, often makes things much worse and lawsuits always do.

Tuesday, March 9, 2010

Obama turning the US into Zimbabwe

Here is an entertaining link. It has some interesting quotes by US legislators concerning the US Economy and comparisons to Zimbabwe.

Very entertaining--
take with a nice glass of California Pinot Noir!!

Monday, March 8, 2010

District 9 and the Oscars

I will have something more serious to write about shortly but I really need to discuss District 9 right now. LA and the Oscars are deeply, deeply flawed in a very fundamental way but movies are important in America and sometimes in the world at large as well.

I was very proud that District 9 achieved 4 nominations: Best Picture, Best Adapted Screenplay, Best Film Editing and Best Visual Effects. C'MON!!! How cool is that??

The camera panned across the audience and I saw Neill Blomkamp AND Sharlto Copley who played Wickus van de Merwe. They showed lots of clips from the film and it was glorious. I did think it unfair that it came up against Avatar in the visual effects was just not meant to be.

I hope those guys went to a ton of great parties and had a blast on the red carpet. They deserved it.

I have not yet seen The Hurt Locker which won best picture (or Avatar..yikes!!!).
Getting nominated is cool enough for District 9. (I saw it 3 times!!)