 Well thank you Bruce for that excessively kind introduction, can I say Dean that it's a great pleasure to be in Dalhousie in the bicentennial year of the university's foundation. And I guess two from your point of view, but less so from my point of view, it's good that my visit has been associated with the definitive end to your long dry summer. It's a real pleasure to give this Innis Christi lecture. I have on my shelves two books in which Innis's name appears. The first is the book entitled The Liability of Strikers in the Law of Tort and which is subtitled A Comparative Study of the Law of England and Canada. This was published in 1967 as I think the fifth publication in the research series of books put out by the Queen's University Industrial Relations Centre in Kingston, Ontario, a really remarkable collection of publications which achieved international recognition. Innis's work in that book was based on work that he'd done in the University of Cambridge, England under the supervision of Bill later Lord Weddewan. The second, I didn't meet Innis at that time, I met him at another academic institution a bit later and that gave rise to the second book in which Innis's name appears which is on my shelves which is the Yale Law Reporter of 1969. Innis and I were both graduate students at Yale. Innis was already, as the publication shows, established in an academic career. I was younger, living abroad for a significant period of time for the first time in my life and Innis was extremely kind and supportive of me, I remember that very well, except that his kindness stopped at the door to the squash court. Innis came back to Dalhousie and devoted his scholarly time to employment law and labour law. I did a lot of that for the first two thirds of my career but have now drifted into corporate law. One justification I might put forward in my defence is that our joint mentor Bill Weddewan Bill was Innis' mentor in Cambridge, my mentor later on at the LSE, pursued both subjects, labour law and company law. My lecture could be seen as an attempt to explore this evening the interrelationships between the two subjects which is why I'm going to try and inflict upon you this particular topic even though I'm giving, I believe, the Innis Christi Lectra in labour law. What my lecture is about is, so to speak, a ship that over the years has sailed under a number of flanks of convenience. When I first came into corporate law, it was called stakeholderism. Later it became corporate social responsibility or CSR. The latest name on the flag is ESG, Environmental, Social and Governmental Objectives. Now these terms are not identical but they do have at least one underlying common theme which is that there should be a move away from shareholder centric corporate law. And that's the theme I'd like to explore with you this afternoon. Now my lecture has three parts. In the first place, the first part, I want to argue that traditional corporate law does in fact pursue a conception of social welfare even in the absence of any express reference to social objectives. This of course is an idea which is already well established in the law and economics literature. So what I want to do is go on and argue that this social welfare objective is attainable only if certain conditions are in place. And if those conditions are not in place then it will be necessary for corporate law to adopt certain social values in addition to its core social welfare objective. And in the second part of the lecture I want to try and show how this argument works out in relation to employees contracting with the corporation and in the third part of the lecture it might work out in relation to corporate harms that companies may inflict on the environment. So my overall conclusion is going to be that a remodeled corporate law has more potential for dealing with employees contracting issues vis-a-vis the corporation than in relation to the prevention of environmental harms by companies where it seems to be external regulation, let's say regulation external to corporate law has a much bigger role to play. So starting point is that traditional unreformed corporate law does in fact pursue a social welfare objective and is not there simply to promote the welfare of shareholders as a group. So that is a quotation from a book on corporate law which appeared in 2004, i.e. before the latest CSRESG debate really got going. It's a very short book, nevertheless it has seven authors of which as Bruce has indicated I was one. And the reason I put it up there is to show that at the beginning of the century a group of corporate law scholars from different jurisdictions writing a book on comparative corporate law thought it entirely unproblematic to assert that the purpose of corporate law was to promote the welfare of society as a whole. So the immediate question which arises of course is how can that proposition be squared with a further proposition which the authors of this book also make which is that corporate law across jurisdictions assigns ultimate control of companies to shareholders and not to any of the other providers of the inputs which are necessary for the business of the company to flourish. And as you can see from this further quote the book seeks to square this circle by asserting that the promotion of the giving shareholders ultimate control of the company is not done for the benefit of the shareholders as such but because it's the best means of promoting the welfare of society. So the first thing is to understand how this perhaps counterintuitive argument actually works. So the first thing to notice perhaps is that control rights over companies are not normally allocated to all shareholders. They're only allocated to a certain class of shareholders namely those shareholders who have no contractual rights against the company to a return on their investments. So control rights are normally allocated to what in the UK we call ordinary shareholders. I think the US refers to them as common shareholders. Whereas those who do have those shareholders who do have a contractual claim against the company for a return preference shareholders are not normally given voting rights. So shareholders without voting rights will be dependent for a return on their investment on how sorry shareholders without contractual rights will be dependent for a return on their investment on how well the management runs the company and what the decisions the board makes about the distribution of profits. Without governance rights shareholders would be exposed to the opportunism of management and the board in those respects. So and this would mean that the supply of risk capital to the company would likely be less. Why should I hand over to the company a chunk of money without either contractual or voting stroke governance protections for my expectations of a return. So one argument you could make for ultimate shareholder control of companies is to facilitate the supply of risk capital to companies. But actually the social welfare argument goes more deeply than this. The point is not simply that ordinary shareholders do not have contractual rights to a return on their investment. It's that other providers of inputs to the company debt finance labor raw materials do have a contractual entitlement to a return to a payment. Moreover these contractual entitlements of the providers of the other inputs need to be satisfied before anything is distributed to the shareholders. So ordinary shareholders sitting at the end of the queue being as it's usually said residual claimants on the company's revenues have the maximum incentive to increase those revenues and hence to improve the operational efficiency of the company. This promotes social welfare because it tends towards the production of goods and services at least cost to the benefit of those who consume. So the standard argument for shareholder centric corporate law is essentially an efficiency argument. It's an argument which says that shareholder centric corporate law tends towards the least use of resources in the production of the goods and services which society consumes. So that's the argument. What's the relevance of this argument for my topic this evening? Well it certainly makes it more challenging because if company law was simply a set of rules designed to maximize the welfare of shareholders then wrenching those rules around so as to add the pursuit of social objectives to the core social welfare objective would be from society's point of view an absolutely straightforward policy decision. Because all the costs would endure to society sorry all the benefits would endure to society and all the costs would fall on the shareholder. But given my starting point that unreformed traditional company law does pursue a socially valuable objective then there is a risk involved in adding further social objectives to the company law agenda. And that risk is obviously that the social welfare objective of company is undermined. In other words one might be facing here a trade off a trade off between society corporate laws core function of promoting the efficiency in the use of resources and the pursuit of the social value. Now the problem or at least my problem with trade off arguments is I find them very difficult to handle. It's very difficult in particular to put precise numbers on the costs and benefits involved in the trade off. So what I'm going to try and do in this lecture is tackle this problem without getting stuck in the quagmire of trade off argumentation by focusing on the last sentence on the slide. Because I think that on reflection this is not just an empirical matter it's also a theoretical matter. My argument is going to be that the social welfare argument which I just outlined is plausible or will operate in practice only if three further conditions are present and I'll examine two of them in some detail in a little while and putting these conditions in place can be seen to be not an undermining of the social welfare argument but as an implementation of it and further my argument is going to be that putting these conditions in place will require corporate law to pursue certain social objectives beyond its core social welfare function or if you like to put it another way that implementing the core social welfare function will require corporate law to add certain social objectives to its agenda. So those are the conditions which are necessary. I've called them assumptions on the slide and I'm sure that's right. My point is that those three conditions need to be in place for the social welfare argument to be achieved. The first is that the company operates in a competitive market. If it doesn't then the management sensitive to shareholder interest can increase the company's revenue simply by raising prices without in any way improving the operational efficiency of the company. I don't want to say anything more about that except to make the point that the social welfare argument does assume an effective antitrust or pro-competition set of laws. The second proposition or second addition is that all the costs of production actually fall on the company because if some of them do not then they will not be reflected in the company's pricing and from society's point of view the company's goods or services will be produced cheaply and society will consume too much of them. And this argument I think is well established in each really old hat in the area of environmental pollution. So if a company production process involves polluting a river but the costs of cleaning up the pollution or preventing it happening fall on other river users or the river authority rather than on the company then those costs will not be reflected in the company's internal accounting processes. So I'm going to come back to that argument in the third part of the lecture. The third proposition is that on which the social welfare argument depends is that the contracting process for non-shareholder inputs to the company operates in a satisfactory manner. Now if markets are competitive this is probably a safe assumption to make in relation to the providers of debt finance, raw materials and customers relations with the company. And if the market is not competitive then the answer is to make the market competitive or if it can't be made competitive as with certain public utilities then to regulate the company's terms of business. But as labor lawyers know, matters are not so simple in relation to how the company contracts for labor. I think tomorrow we'll probably be talking about some of the difficult issues that arise in relation to the initial hiring process. What I'd like to do in the lecture is focus on problems that arise after hiring in terms of the tricky relationship between the company's internal labor market and the external labor market. So I'm going to assume but only for the purposes of this discussion that the initial hiring process operates in a satisfactory manner and I'm going to focus on post-hiring contracting problems. And my argument essentially is that after hiring the balance of a negotiation the balance of power if you like between workers and the company can shift significantly in favor of the employer for two reasons. First is as the employee continues in employment he or she is likely to put down roots in a community especially family roots but not just family roots so that there are non-financial costs of job shift unless the new job can be found in the same geographic area. Second as the employee continues in employment he or she acquires firm specific skills which another employer will not value as highly as the existing employer and perhaps not even value them at all. And this generates a financial cost of job change because an alternative employer is not likely to be prepared to offer the same wage level as the existing employer because from the new employer's point of view the employee is in fact less skilled than he or she claims to be. Knowing this, knowing of this situation the existing employer is likely to offer the employee suboptimal wages i.e. wages of a suboptimal in relation or wages which do not reflect the level of firm specific skills which the employee has and knowing this the employee is likely to feel constrained to accept the offer. Even worse from society's point of view the employee may conclude it's not worth investing time and effort in acquiring firm specific skills. Of course the boot may be entirely on the other foot if what the employee acquires in the course of employment is generic skills, transferable skills and the employer may find that it has spent time, money, resources in training an employee only to see that employee go off to a competitor but there are contractual ways in which the employer can protect itself. Okay, so that's the problem. When I was young and when Innis was young the answer to this problem was very simple and the answer was a collective bargaining. The atomized employee was replaced by a collective voice and the collective voice was able to deal with these continuing problems of the employment relationship. And this therefore was a labour law solution to a contracting problem existing outside corporate law. But in many jurisdictions around the globe collective bargaining is no longer the force it was nor are effective trade unions. Just as important at the same time as collective bargaining and trade unionism was in retreat managers responsive to shareholders became under greater pressure, came under greater pressure to take advantage of employee vulnerabilities especially managers in companies subject to international competition in a globalizing economy. As Jeff Gordon from Columbia has recently said managers became in the globalized economy less tolerant of slack in the company's operational activities and they would therefore be more likely than they'd previously been to bear down on headcount and to reduce levels of wages. And this led to something which previously had been I think unknown or at least very rare namely management's deciding to close down plans which were in fact profitable. To give you a couple of examples there's the carrier plant of United Technologies which featured fairly heavily in President Trump's presidential campaign. And there was the Tata plant in Florange which lent its name to the French law of 2014 which was the French legislature's response to that particular an example of that particular management decision. So this does as examples but this slide I think shows you if you like the high level consequences of these developments. I don't know how clear that slide is to you but let me say a bit about it. Along the horizontal axis you've got the position of a worker or a person along in terms of their income around the globe. So this is a global distribution of income on the horizontal axis and on the vertical axis you've got the gain in real incomes over the period 1998 to 2008. Now our interest is essentially in the workers to the right of point A. So this part of the graph and you can think of these workers as being essentially the workers in the developed countries. And what you can see is for workers between the 60th and the 80th percentiles so the lower half of the spectrum of income distribution in developed countries that gains from over this period were small in some cases non-existent. So that's this group A to B. For workers especially those in the top desir of global income distribution their gains over this period were extremely substantial. In fact at the top of the distribution their gains were better than the gains from the workers at the bottom end of the distribution in global terms. Now so what one's seeing and this is as the slide says a slide produced by the World Bank probably one of the more famous slides they produced in recent years. What it suggests is that there was growing inequality in developed countries because the gains from globalization were captured by a minority of the workers in developed countries and the majority either gained little or indeed gained nothing at all. Now I don't want to argue that the shape of this graph is entirely determined by the contracting problems I identified earlier. There are obviously other things in there too but I would want to argue that the contracting problems I've identified made a substantial contribution to the inequality which this graph reflects. And another way of putting it is not just or a further point to come out of this it's not just growing inequality but that it's a growing inequality which produced if you like an externality, a negative externality but this time of a global character or a very general character sorry not a global character, a general character that is to say it made it turned the political atmosphere in developed countries against the activities of private sector corporations and made populations less willing to tolerate the processes of globalization so I don't think it's an exaggeration to see these anti-establishment developments as reflected in for example the Brexit vote in the UK the election of President Trump in the United States and the growing populist and nationalist movements across Europe. Okay so that's very general stuff the question is from my point of view what responses might corporate law make to this and I think there are really two complementary things that you might want corporate law to do one is to reduce shareholder pressure on management to take advantage of the vulnerabilities of workers and the second is to increase the voice of workers in strategic management decision making I'd like to say just a word or two about each of those but I don't want to go into enormous detail into what one might change in corporate law in order to reduce shareholder pressure on management I've listed on the slide the three matters which seem to me to be crucial in giving shareholders this making management strongly responsive to shareholders and these are the rules which make it easy for shareholders to remove managers they disapprove of rules which make it which facilitate hostile takeover bids and rules which facilitate the operations of activist hedge funds so on my agenda they would be the corporate law rules that one would look at if one was trying to achieve this particular objective one other thing one might say is that what this shows up is that there's an ambiguity in the initial social welfare argument that I outlined which is how much social pressure how much pressure on managers must shareholders be able to assert how intense if you like must the ultimate control of shareholders over managers be in order to yield the efficiency gains of the initial theory what I'm suggesting is that some reduction in the intensity of shareholder pressure is necessary in order to prevent that accountability of managers to shareholders resulting in what is in effect a wealth transfer from employees to shareholders not an increase in the company's operating efficiency second set of reforms would be to do things which would move employee concerns higher up the managerial agenda there are many ways in which this could be done some of them would be internal to the corporate structure such as worker representation on the board some would be external such as a revivified collective bargaining system and some would lie somewhere in between such as works councils with enhanced influence over corporate strategy or even resetting the investment incentives of the people who invest pension funds on behalf of workers I doubt if there's a single cross-jurisdictional solution which is best, which is optimal to achieve this increase in employee votes because I suspect that the optimal situation the optimal reform is highly dependent upon particular arrangements in particular jurisdictions I myself have argued elsewhere that the German system of strong works councils plus employee representation on the board within the firm coupled with multi-employer collective bargaining outside the firm has enabled German management and German trade unions to produce a much more efficient form of contracting for labour than you find in most British companies but I'm not trying to make a simplistic argument that you can find a set of institutions working well in one jurisdiction and simply move them to another jurisdiction and expect them to work equally well the only point I want to make at this stage and it's a very general point is that experience across jurisdictions and actually experience within jurisdictions over time doesn't suggest that strong, exclusive ultimate control by shareholder over companies is necessary to produce the social welfare gains that I started off with Okay, so, R3 I'm going to try and talk about environmental health so mandatory disclosure by companies of environmental information is now absolutely established in most developed jurisdictions but there's considerable debate over the rationale for this reporting essentially there are two rationales in competition one rationale traditionally adopted by the Security Exchange Commission in the US is that the purpose of disclosure of environmental information is to help investors assess the value of the company the competing rationale is that disclosure is meant to inform the public generally about the company's environmental footprint to put it crudely the first sort of reporting, investor focused reporting is about the impact of the environment on the company the second sort of reporting is about the impact of the company on the environment I'm actually doubtful that investor focused reporting will actually reveal much new information because it's an awfully long time since a company's annual reports consisted entirely of the backward looking numbers that you find in the profit and loss account and the balance sheet forward looking reporting sometimes called narrative reporting sometimes called financial reporting sometimes called strategic reporting is absolutely required of all publicly traded companies across developed jurisdictions and this additional forward looking non-numeric reporting is based upon the ideas UK law puts it that investors need to know about the quote principle risks and uncertainties facing the company so a gasoline distributor would need to report under this general standard about the likely impact on its business of a switch to electric cars whether or not there was any particular investor focus any specific investor focus reporting requirements in place or not moreover the investor focused rationale doesn't necessarily mean that a company would take steps to reduce its environmental impact for example a coal company coal mining company might respond to environmental information by lobbying against carbon emission legislation and anticipating that such legislation will eventually come in the meantime produce as much coal as possible in an unregulated environment indeed the environmental change might be an opportunity for the company you may not know, probably don't know that there's now more wine produced in the south of England than at any time since the Middle Ages French quote, sorry English quote sparkling wine now competes very favorably with champagne in blind tastings to the point where French viny culturalists are moving into the operation of UK vineyards now my point is that you can't expect a company engaged in wine production in the south of England to spend resources seeking to reverse the process of climate change at least short of the point where the south of England becomes a desert so and more generally the point is that in this investor focused reporting notion it's the sustainability of the company's business model that's at issue not the sustainability of human life in an era of global warning okay, so the alternative approach seems much more attractive the purpose of disclosure is indeed to produce information which is probably irrelevant to the assessment of the company's value by investors but which is designed to discourage companies from imposing environmental harm so the question is how is it that near disclosure induces the company to reduce its environmental footprint well, it might be that the board which has to sign off on the report learning for the first time about these harms the company is committing or at least the extent of them decides that they should be reduced more likely I think it's that the disclosure will cause the company reputational harm with investors with employees or with governments or with environmental activist groups but however that occurs what's important to understand is the way in which the disclosure triggers adverse market or political reactions which and how those adverse reactions feed back into corporate behaviour but the only point I want to make here about that is that the role that corporate law is playing here in this broader rationale is essentially a minor one the constraint on corporate behaviour is the market or political responses which may be triggered or at least facilitated by corporate disclosure but it's not corporate law itself which is the main engine for driving the desired results okay, I've just put that on the slide that's a letter from Larry Fink the CEO of Blackstone to the CEOs of the various companies in which Blackstone Invest sent out earlier this year which gave rise to a lot of discussion and one reason I think it did generate some sort of discussion is it's absolutely ambiguous as to which rationale for environmental disclosure it's adopting and it's also a little bit unclear whether Fink is asserting on behalf of all the people whose money Blackstone Invests that their priority is to reduce environmental harm rather than any of the other goals they might have for investing okay, so beyond disclosure it's very difficult to find any mandatory rules in corporate law which address the issue of environmental harm and this is so even if one widens one's focus a bit so as to take in some recent proposals that have been made for expanding the conception of a company's purpose beyond promoting the interests of the shareholders so as to embrace a wider range of objectives which might include environmental protection but the striking thing about these proposals is that they all proceed on a voluntary basis so that's a quotation from some bits of a report a recent report to the French government which does indeed propose that the company should have the possibility of inserting into its articles of association a raison d'etre which might include environmental considerations but as you can see from that quotation this is a voluntary thing this is removing an obstacle which the authors of the report assume or have established exists in French law for companies which might want to take this step it's not a proposal for a mandatory obligation upon companies a similar proposal has been made by Oliver Hart recently the economist of Harvard my own colleague and friend at Oxford Colin Mayer has made a similar proposal focusing however on the institutional arrangements of corporate governments he suggests that companies should be free to introduce alongside the existing executive board what he calls a trust board which would be the guardian of the company's values and purposes somewhat ironically this proposal is triggered by something he found in the corporate government setup of the Tata group of companies which I mentioned earlier anyway now these are all I think very interesting proposals but from the point of view of a corporate lawyer I think they're pretty uninteresting at least in the UK and I think in Canada as well it's never been the case that the shareholders have to define the purpose of the company in commercial terms if they want to define the company's purposes in wholly or mainly in non-commercial terms then that's fine and that is the set of objectives within which the management of the company must operate and equally in the UK at least it's perfectly open to the shareholders to add further refinements to the company's board structure and if they do so then that's the board structure within which the directors of the company have to work so the point here is that if these initiatives are not mandatory and if the current law doesn't stand in the way of their implementation then you might ask the famous question is why don't we see them already or put them out more positively what would it take to move shareholders towards the adoption of one of these alternatives okay so let me conclude my overall argument has been that shareholder centric corporate law maximizes the incentives for managers to increase the company's overall revenues from society's point of view its interest is somewhat narrower than that general proposition from society's point of view its interest is in increasing the company's revenues from improvements in the company's operating efficiency and not through wealth transfers from employees, customers or the general public to shareholders wealth transfers do not imply any increase in operational efficiency of the company simply an increase in the company's revenues so in order to that the efficiency arguments that I started off with and all of those objectives should be achieved one needs to supplement shareholder centric corporate law with further rules now some of those rules may exist entirely outside corporate law such as antitrust law as I've suggested some may exist entirely within corporate law such as corporate law's traditional concern with creditor protection arising out of limited liability some may exist mainly outside corporate law but with corporate law playing a bit of a role in the area, a supporting role in the area as I've suggested is the case with environmental harms but my main interest as you may guess is with employees and employees contracting problems and what I've suggested is that our traditional solution to this problem which was indeed entirely outside corporate law in the area of collective bargaining that the solution for future contracting problems may benefit from the bringing together of corporate law and labour law techniques I'm sure that if Innis were alive today he would be working at this problem since he isn't we must do the best we can without him thank you very much