Employees of a manufacturing firm object to the company’s entering into a contract with the U.S. Department of Defense. Workers at a movie studio take issue with a film’s portrayal of a marginalized group. In both cases, protests ensue and employers find themselves struggling with their response. “Protests from Within: Engaging with Employee Activists” explores these scenarios and is just one example of the cutting-edge work emanating from Stanford’s Arthur and Toni Rembe Rock Center for Corporate Governance. Co-authored by David Larcker, a senior faculty member of the Rock Center, the head of its Corporate Governance Research Initiative, and a professor at Stanford’s Graduate School of Business, the report is a carefully researched analysis of challenges that arise when employees protest against their employers for any number of policy reasons—and company managers need guidance in framing an appropriate response.
Insight into complex, timely topics explains much of the success of the Rock Center, now marking its 15th anniversary. A joint venture of Stanford Law School and Stanford GSB, the center keeps pace with fast-moving areas affecting businesses that executives, boards, and investors need to understand.
“We’ve been well ahead of the curve in terms of spotting emerging issues,” says Joseph Grundfest, JD ’78, a founding director of the Rock Center who is now a senior faculty member and the W.A. Franke Professor of Law and Business at SLS. “We were preaching about cybersecurity before people realized it was an absolute crisis. We know that’s a big issue today, but what will you have to worry about tomorrow?”
Founded in 2006 with a gift from venture capitalist Arthur Rock and pioneering tax attorney Toni Rembe, the center pursues research; hosts executive education programs serving C-level executives, corporate directors, investors, regulators, and attorneys; supports faculty research; and collaborates with students on programs that match their career and academic interests. Rock says he was inspired to establish the center after observing companies backdate executive stock options, a controversial practice that exploded in the early 2000s. “There was a time when companies and directors didn’t quite tell the truth about what they were up to,” says Rock. More recently, he adds, companies generally have improved their governance. “Most of them are toeing the line.”
The Rock Center remains focused on helping executives and corporate boards grasp sensitive and constantly evolving governance matters. “Protests from Within,” for instance, which was published by the center’s Corporate Governance Research Initiative (CGRI), notes that while activism can be “distracting to employees and reduce productivity,” discouraging it can hurt staff morale and conflicts with principles of free speech. The study advises executives and directors to reflect on how to “encourage the appropriate level of activism” and to engage workers on relevant issues without
undermining corporate objectives.
Other CGRI papers examine current, and sometimes headline-grabbing, topics ranging from corporate hiring practices to ESG (environmental, social, and governance) challenges. One recent paper even asks, “Are Narcissistic CEOs All That Bad?”(The answer, it seems, is “not always.”)
The Rock Center’s research has also leveraged critical business data to build valuable, highly specialized clearinghouses. The Foreign Corrupt Practices Act Clearinghouse, a joint venture with the Sullivan & Cromwell law firm, maintains a database of documents and statistics related to enforcement of the FCPA, the 1977 law outlawing payments by U.S. companies to foreign officials. The Securities Class Action Clearinghouse (SCAC), a collaboration with Cornerstone Research, provides a free database of detailed information related to the prosecution, defense, and settlement of federal class action securities fraud litigation.
Most recently, the Rock Center created its COVID-19 Memo Database, which to date has collected more than 14,000 COVID-related research memoranda written by large U.S. law firms. Practitioners can find, for instance, DLA Piper’s update on the limits imposed by the state of Texas on President Biden’s vaccine mandate and Morrison & Foerster’s analysis of employer mask requirements.
Many of the Rock Center’s videos, research papers, and other publications are free and easily accessible on its website. By addressing constituents both within and outside the Stanford community, “we want to foster an ecosystem of learning,” says Michael Callahan, the center’s executive director and professor of the practice of law at SLS.
For their part, Stanford students participate in the Rock Center primarily through its visiting speaker series. “I remember very rich discussions,” says Justin Bryant, JD ’21, who served on the Rock Center’s student advisory board and moderated a 2021 discussion with Woodie Dixon, Jr., general counsel at education technology firm Chegg Inc. “It was a great opportunity for us to hear from practitioners and ask questions in a very intimate format,” Bryant adds.
“We were preaching about cybersecurity before people realized it was an absolute crisis. We know that’s the big issue today, but what will you have to worry about tomorrow?”
—Joseph Grundfest, JD ’78
Directors’ College, the Rock Center’s flagship executive education program, attracts 240 participants a year for three days of discussion groups and lectures. (The next Directors’ College is scheduled for June 19-21, 2022, at SLS.) While the curriculum covers many fundamental, bread-and-butter governance concerns, like executive compensation and succession planning, the Directors’ College program is renowned for its exploration of new and difficult questions: How to respond to a ransomware demand? What’s the best approach to ESG disclosure? How can a board better promote diversity throughout the company? The conference owes its popularity and uniqueness to its ability to attract industry leaders as keynote speakers, including Ursula Burns and Oscar Munoz, along with a host of Stanford scholars who share their expertise, such as Colleen Honigsberg, associate professor of law, on the fundamentals of accounting for directors, and Rob Daines, Pritzker Professor of Law and Business, associate dean for global programs, and a senior faculty member at the Rock Center, on shareholder activism.
Public trust in institutions, “whether the media, government, or religious or academic institutions, is on a downswing, and corporations are in the same boat,” Callahan says. But if executives and directors can be clear about the corporation’s role, he adds, “companies have an ability to influence society and the lives of customers and employees in a meaningful way.”
Callahan attributes much of the Rock Center’s success over the past 15 years to the talented staff of researchers and technology experts. “Under the leadership of Rock Center managing directors Amanda Packel and Kristen Savelle, both attorneys with corporate governance expertise, the team has excelled in making our work more relevant, more on the front line, and deeply impactful for our Rock Center community.” SL
Louise Lee is a former staff writer for the Wall Street Journal.