The automotive industry has accelerated its transition to sustainable energy. Last week, an electric vehicle company completed one of the largest IPOs on Wall Street. One day later, six carmakers and thirty governments announced that they will only sell zero-emission vehicles by 2040. This shift to clean transportation requires substantial investments, and green bonds could be part of the solution. Ford notably intends to spend $30 billion on electric vehicles and issued $2.5 billion of green bonds on November 8 to finance the project. This is the biggest green bonds issuance ever completed by a US corporation.

Currently, there is no definition of green bonds under US law. As a result, issuers can self-label their bonds as green or provide a third-party opinion certifying their compliance with nonbinding international guidelines, such as the Green Bonds Principles (GBP). Under the GBP, green bonds’ proceeds must be used for eligible green projects (clean transportation, renewable energy, etc.) and respect some core principles related to the use of proceeds and reporting, such as transparency in the selection and management of the green projects and annual reporting. It is this third-party certification option in compliance with the GBP’s standards that Ford chose.

A significant benefit of third-party certification is that it allows investors to externalize their due diligence costs more easily. Instead of spending time and money to assess the sustainability of bonds and determine whether the security is compatible with their investment policies, the investors might simply rely on the third party’s opinion. This is especially relevant because an increasing number of institutional investors, such as BlackRock, integrate sustainability into their investment decisions to reduce systemic risk and attract or retain investors.

This trend creates considerable demand for green bonds. Since 2015, the average market growth of green bonds has been 60%. This high level of demand is also boosted by the current enthusiasm for sustainability-linked projects. For example, Ford’s stock price surged by 5% following the announcement that the company would spend $11 billion on factories dedicated to electric batteries and electric trucks. This positive attitude towards sustainability improves the liquidity of green bonds and encourages some investors to pay a “greenium.” In other words, some investors will be willing to accept lower yields for green bonds as opposed to traditional bonds.

Ford’s offering exemplifies this “greenium” because the green bondholders will not benefit from tax exemptions or higher priority in cases of insolvency but have accepted to receive lower interest rates.

Green bonds are also an opportunity for issuers with credit risk to access low-priced debt. For example, Ford’s credit rating was downgraded from investment-grade (the highest status) to speculative investment at the beginning of the pandemic. The downgrade was justified by the incertitude related to the impact of COVID-19 on the company’s operations. When Ford issued “Covid bonds” to face the financial consequences of its factories’ shutdown, it was only able to borrow with interest rates around 9% versus 3% for its green bonds.

In response, Ford’s CFO John Lawler announced that the company would buy back the “Covid bonds” to reduce its debt-to-equity ratio and issue green bonds to “improve our balance sheet, lower our debt, and lower the cost of our debt considerably.” While Ford remains rated as a speculative investment, it was able to issue $2.5 billion in green bonds due 2032 at an interest rate of 3.250%. The foregoing demonstrates how companies, including those with poor credit ratings, could take advantage of green bonds to improve their balance sheet by accessing debt at lower costs.

But one major issue surrounding green bonds is transparency­­ – that is, some investors have questioned how “green” these bonds really are. Green bonds ostensibly encourage sustainable projects by decreasing the borrowing costs of companies. At the same time, they can reallocate the capital of investors towards green projects. This sounds too good to be true, doesn’t it? Indeed, the lack of binding standards on the meaning of “green” permits “greenwashing” through the issuance of self-labeled green bonds. Green junk-bonds, which do not necessarily deliver green results, are already on the market and might disappoint investors. Moreover, the possibility to obtain a certification from several third parties could create a race to the bottom where each expert would apply lower standards to retain clients and certify their bonds as green.

Improving the transparency of green bonds will require the introduction of specific disclosure requirements. Indeed, SEC Commissioner Allison Herren Lee clarified that there is no general obligation to “reveal all material information.” SEC’s Chair Gary Gensler, therefore, wants to reform the existing guidance on climate risk disclosure by developing mandatory disclosures on climate risks before the end of the year. The SEC should take this opportunity to also provide a single and binding definition of “green bonds.” This would preserve the market’s confidence in the ability of green bonds to fight climate change by creating enforceable minimum standards.

The SEC historically “deferred to the private accounting industry to set standards for financial statements.” It could thus benefit from the creation of the International Sustainability Standards Board, which will develop sustainability disclosure standards. But this might be a lengthy process. For example, the EU is preparing a European Green Bonds Regulation building upon its Taxonomy Regulation. While the Taxonomy Regulation intends to define green investments and entered into force in July 2020, the concrete standards have not been adopted yet. Although the SEC did not win the race against Ford’s electric cars, it could at least provide a safe track for future issuers and investors.

During the insurgence of positive COVID-19 cases, major festivals were put on hold as health officials grappled with the breadth of the virus. Almost immediately, it became apparent that it would be a major health concern to continue hosting large events during the pandemic. One by one, the concert business began to announce cancellations until further notice.

As the world opened up, many festival promotion companies began relying heavily on large outdoor events to rebuild business. This reliance has proven to be successful as a number of major festivals are selling out in record time and ticket sales have increased 10% from 2019. Certainly, people are eager to gather once again after a year of restrictions, but the wave of festivals invites questions around whether there are adequate safety systems in place.

In the wake of the tragedy at Travis Scott’s sold out Astroworld festival in Houston, Texas, promoters must ask what can be done to avoid another incident like this. One lawsuit describes Astroworld as one of the “deadliest crowd-control disasters at a concert in the United States in decades.” With almost 50,000 people in attendance, Astroworld was tightly packed with fans eager to see their favorite performers. As Scott made his way to the stage, a countdown began and the crowd began to push towards the stage, trapping many people to the point where attendees found it hard to breathe, difficult to move their hands, and impossible to escape. Many attendees suffered cardiac arrest from the stampede and had to be “crowd surfed” to safety. The concert ended in tragedy with nine dead, about 300 people treated for injuries, and 11 hospitalized for cardiac arrest.

Live Nation believes that an occurrence like Astroworld is rare enough that it will likely not adversely affect the festival business at large. However, for a tragedy like this to have taken place, something had to have gone wrong in a fundamental way. Live Nation believes that the demand for festivals will continue to grow even though they saw their share price fall by over 5% on November 8, a few days after Astroworld. Nevertheless, even if Live Nation is unconcerned about their future profits, a larger question remains surrounding where Astroworld promoters went wrong. Many are rightly calling the tragedy “preventable and predictable,” which prompts the question of what the concert business can learn from Astroworld.  Furthermore, while numerous lawsuits have been filed against Scott and Live Nation, we need to assess the role that Travis Scott’s rage culture played in the tragedy.

Assessing where Astroworld went wrong is the first step to moving forward. It is apparent that Astroworld’s problem was not overcrowding because other similar events like Outside Lands, which attracted a crowd of 75,000 concertgoers on the first day, did not see any fatal casualties. The problem appears to have resulted from inadequately trained security detail and a flawed festival design.

Astroworld’s security details included 528 Houston police officers and 755 private security officers provided by Live Nation. While Astroworld’s quantity of security appeared sufficient, these individuals were severely under-trained to administer effective crowd control. Video footage reveals a security officer pushing a festival attendee over a barricade in a manner that could have resulted in broken bones. Additional video footage reveals ticket-less attendees breaking down a metal fence to get past security. Higher quality security officers could have factored in mitigating the safety concerns that resulted in the casualties.

Furthermore, most major festivals are designed to provide barricades to separate attendees and avoid suffocating crowds, but Live Nation did not include this safety measure for Astroworld revealing a lack of adequate preparation for the crowd. The order of the show also made it very easy for the crowds to anticipate when the main headliner, Travis Scott, was preparing to go on using a countdown clock, which inadvertently encouraged many to push towards him and crush attendees that were already closer to the stage. The insurgence of live festivals means a heightened need for preparation. This includes safety concerns and smart festival design to avoid mass crowding— Live Nation failed to provide both.

While the tragedies that occurred at Astroworld were preventable and it’s likely that this was not solely a Travis Scott specific problem, it’s imperative to also acknowledge how Scott’s encouragement of rage culture influenced the events. Vulture quotes an attorney who stated that “Travis Scott has a history of inciting violence and creating dangerous conditions for concertgoers” citing an incident during Lollapalooza in 2015 where Scott “start[ed] a chant of, “We want rage!” which led to his show being cut short. HipHopDX editor-in-chief Trent Clark stated, “[Scott’s] whole aesthetic is about rebellion.” Scott himself is quoted on Twitter encouraging fans to sneak into Astroworld where he also expressed his desire to “[sneak] the wild ones in.” These tweets have since been deleted.

There is no doubt that Scott’s encouragement of rage, culture, and chaos had an influence on the events that unfolded, but we must be careful about the media carelessly creating a narrative portraying black men as violent thugs without objectively considering the role of Live Nation. Scott’s attorney shared that, “Travis didn’t really understand the full effect of everything until the next morning. Truly, he did not know what was going on.” We have to take this into consideration and take a neutral, solutions-based approach in response to these events. With the resurgence of festivals, the concert business must respond with better safety protocols to prevent what happened at Astroworld.

The last two months have been devastating for Facebook. In September, its stock price soared to the highest it has ever been. Since then, the price has fallen nearly 20%, in large part over revelations of how the company balances its commercial interests with user safety — both on and off the platform.

The Facebook Files, The Facebook Papers and subsequent hearings on the Hill suggest that a lack of transparency and accountability in how social media platforms in general, and Facebook in particular, operate has led to a wide variety of negative social outcomes. And what’s worse is that, while many platforms may be aware of their part in amplifying existing social turmoil, they do not seem particularly incentivized to change their commercial practices. But have these revelations been a watershed moment?

Facebook recognizes social networks need regulation. While the platform has been a boon for global commerce, providing a voice to the voiceless, and connecting communities across the globe, the fact remains that it cannot reasonably be left to mitigate the negative social experiences that result from this uninhibited, amplified engagement.

Facebook, of course, is not the only platform that should be scrutinized. For example, Snapchat is embroiled in litigation over its role in the death of three young people by encouraging (and rewarding) users for snapping while driving at dangerous speeds. Grindr, the dating app, has also been implicated in harming its users ever since it decided not to remove an ex-lover’s impersonation attempts which enabled harassment, stalking, and the fear of real world violence.

The recent Facebook revelations are a brick, but not the wall. Congress has known about the real world consequencesof social media platforms for some time. Whether or not these revelations are a watershed moment depends on lawmakers’ ability to re-imagine platform liability in the 21st century and learn from its mistakes in the past. Yet, reforming platform liability is no simple feat. Congress is stymied by two roadblocks: 1) prior legislation and 2) lack of subject-matter expertise.

Section 230 of the Communications Decency Act (CDA 230) governs liability for platform companies. CDA 230 provides that no “interactive computer service” shall be held liable as the speaker or publisher of third-party content posted on its platform. Under this law, courts have generally provided broad liability protections for platform companies against lawsuits that might seek to hold them liable for the content that users post on their platforms. However, in the wake of the Trump presidency, the insurrection at the Capitol, and the testimony from tech whistleblowers, lawmakers have proposed measures to reform this legislation in light of its undesirable outcomes.

Proposals to reform 230 range from well-meaning, but misguided to disingenuous and dangerous. The Platform Accountability and Consumer Transparency Act (PACT) is in the well-meaning camp. It attempts to address the issues where platforms have safe harbor for claims arising out of alleged civil rights violations by pegging liability and remediation efforts to the size and scope of the company. Yet this proposal, like so many others, fails to address the harms of hateful speech and mis/disinformation.

Efforts by lawmakers under the Protect Speech Act—a separate proposal—would simply force platforms’ internal operational guidelines into the eye of public scrutiny. This would enable violators to come up to the line of policy enforcement, but not be removed from the platform. Here, almost purposefully missing the issue, we see Congress’ efforts to regulate platforms as a backlash against the false notion of censoring conservatives; they say nothing about speech that incites violence and, in fact, potentially make platforms liable for good faith efforts to remove that speech.

Moreover, beyond the gaffes of misunderstanding Facebook’s business model or the harms of a finsta, Congress has a gap in its technological subject-matter expertise. Though Congressional members need not be data scientists, software engineers, or product managers, when those experts raise issues of technological governance it is troubling to hear members say “I can understand about 50 percent of the things you say.” A lack of investment in understanding the implications of viral media, the real world effects of dangerous speech, and now the metaverse will continue to have lawmakers playing catch-up to where technology is today.

To mitigate these challenges, Congress should approach platform regulation with a set of principles that optimize for open access, smart transparency, and harm reduction.

• Open Access: The uninhibited connections between Americans and the global community is a mainstay of social media platforms. The ability to share cat videos, new music, and personal triumphs with billions is what makes the social web so unique at this moment in history. Regulating out the harmful effects of social media while maintaining avenues for people to connect globally is a delicate act. Lawmakers should consider both how proposed legislation expands and contracts this principle and what effects it might have on freedom of expression.
• Smart Transparency: Calling for transparency into platform companies’ content policies and user reports is a good first step. However, to maximize transparency, lawmakers need to understand how data scientists, engineers, and product managers think about the real-world effects of social media to better regulate it. Commissioning a task force of experts who have worked in Online Trust & Safety is a more targeted approach to transparency and will ensure Congress’ desired outcomes for platform regulation.

• Harm Reduction: As a general rule, platform companies should not profit from hate speech, disinformation, or otherwise illegal content. But even further, rewarding this behavior through algorithmic boosts makes it all the more likely that harm will occur off-platform and generally lessen the ability for people to share openly online. Congress should consider penalties that go beyond a slap on the wrist and devise effective enforcement mechanisms and penalties in connection with the FTC and FCC to hold platform companies accountable for maintaining a healthy social ecosphere on their platforms.

Are tech platforms finally heading for a reckoning? Maybe. But if lawmakers are looking for a solution to the negative externalities of social media, they will need more than just policies. They need expertise to guide them.

The Chinese Communist Party’s (CCP) recent reforms are creating uncertainty in the world’s second largest economy. For the last two decades, the CCP stuck to politics and left business to businesses. This hands-off approach led to the rise of China’s multi-billion-dollar giants like Alibaba and Didi. In big tech, the CCP nurtured the growth of its national champions, like Weibo and Baidu, by blocking foreign competitors—specifically, Facebook and Google. For tech firms, it was the Wild West within an authoritarian system. But recent reforms under Chairman Xi Jinping show the CCP abandoning its old approach and meddling in business. Xi appears to have ushered in what many are calling the end of China’s “Gilded Age” and a bringing of big business to heel.

The CCP’s recent reforms stem from concerns about national debt, inequality, and desire for greater state control. This month, for instance, China unveiled its Personal Information Protection (PIP) law. The CCP claims that the PIP law is meant to protect the personal data of Chinese citizens. While Europe instituted its own data protection laws in 2018, China’s reaches much farther—placing particular emphasis on data that flows beyond China’s borders. Like many of China’s laws, it is as opaque as it is far-reaching. While targeting foreign firms, the law appears to still allow China to collect information on its own citizens. That creates uncertainty for foreign firms and investors who rely on the collection of consumer data. It is also a reminder to foreign companies that, in China, they may never compete on a level playing field.

Consolidating state power is nothing new under Chairman Xi.  Over the past decade, his anti-corruption purges led to the arrest or political exile of hundreds of his political rivals. In recent years, however, Xi has extended his purges to Chinese film stars, business leaders, and even the sagely cartoon bear Winnie the Pooh. More recently, Alibaba’s owner, Jack Ma, was set to become China’s richest billionaire, but he mysteriously disappeared for several months. Before Ma’s disappearance, his company, Ant Group, was ready to launch the world’s largest IPO. However, the CCP blocked the IPO, eliminating $76 billion from Ant’s value. That shock rippled through global markets and left business leaders, Chinese and foreign, scratching their heads.

The CCP’s crackdown on big tech has had a chilling effect on the industry. Since February, investors have erased more than $1 trillion from the market value of China’s largest listed tech firms. Most Chinese companies now host Communist Party cells, which have authority to dictate decision-making. China’s Cyberspace Regulator has taken stake in TikTok’s parent company ByteDance, and the social media firm, Weibo. Why has the CCP instituted such drastic reforms?

The Party line is that it has a genuine interest in encouraging companies to focus on “common prosperity.”That aligns with the CCP’s long-term goal of closing the wealth gap between China’s billionaires and its poor majority. However, another explanation is hard to ignore. Chairman Xi has taken great pains to maximize his authority and to extend his tenure beyond traditionally appropriate term limits. Perhaps the recent reforms have less to do with China than they do with Xi’s insecurity amongst rivals and distaste for sharing power. That may, at least, help to explain Xi’s aversion to Winnie the Pooh.

Embroiled in a number of controversies — from indifference to election tampering allegations to whistleblower reports regarding ignored health implications for young users — Facebook announced last month that it would change the company’s name to Meta and shift focus to virtual and augmented reality technologies.

At Facebook’s annual Connect Conference, Facebook CEO Mark Zuckerberg articulated his vision for a virtual future called the “metaverse,” which will allow for new kinds of art, business, entertainment, and social interaction. In particular, Zuckerberg emphasized his desire for the metaverse to facilitate “hundreds of billions of dollars of digital commerce”resulting from novel approaches to content creation and interaction.

Facebook already has over 10,000 individuals working on augmented and virtual reality projects in its Reality Labs division and has spent billions of dollars on acquiring companies in the space. Nevertheless, it plans to add another 10,000 employees in Europe and open a series of Meta retail stores to preview and sell its virtual reality products.

The important question seems to be: Why make this change now? Since Facebook’s acquisition of Oculus 7-years ago, it’s been an open secret that Facebook planned to make significant moves in the augmented and virtual reality spaces. Though a corporate reorganization on this scale requires a serious degree of premeditation, the timing of this announcement seems far from serendipitous.

Facebook appears to be attempting to steer the conversation away from antitrust legislation, its disregard for internal research showing serious health consequences for teenage users, and an algorithm that prioritizes profit over individual safety.

One might have hoped that in announcing this pivot into new and untapped technologies Facebook — now Meta — would’ve addressed the many political, social, and health-related issues the platform poses and perhaps outlined a more socially conscious path forward. They did not. Instead, Zuckerberg focused on the profit-generating potential of a new mode of social interaction — entirely virtual and privately owned.

In fact, the implications of Facebook moving into the metaverse seem entirely deleterious. Yes, Meta has committed to significantly increasing the number of employees in its Reality Labs division and has indicated serious expansion of its investments in augmented/virtual reality. This may have unforeseen positive consequences, like the development of virtual reality classrooms for underprivileged students. But what seems more likely is the migration of user bases from Facebook, Instagram, and WhatsApp to the “metaverse”, where they’ll be subject to the same algorithms that prioritize Meta’s profit over their individual safety — just in a more immersive environment.

The public seems to gravitate toward the latter view as poll data indicates trust in Facebook dropped 5% after the announced rebrand to Meta. Meta is implicated in too many large-scale social controversies for it to honestly believe that the change of a name would solve anything.

If Meta hopes to improve its relationship with the public, the company should commit to addressing the most dangerous problems its platforms pose. For example, a promise to seriously address the mental health implications of Instagram, as outlined in the Facebook papers, would go much further in resolving its public image than a simple rebranding.

Coca-Cola has exercised its right to acquire full control over BodyArmor in its latest attempt to wrestle complete dominance of the sports beverage industry away from Gatorade, a PepsiCo subsidiary. Coca-Cola, which acquired a 30% stake in BodyArmor in 2018, has acquired the remaining 70% of the company for $5.6 billion, establishing the brand’s total value at $8 billion. When completed, this acquisition will be the largest in the history of Coca-Cola.

BodyArmor has grown dramatically since Coca-Cola first invested in the company in 2018, when BodyArmor was only valued at $2 billion. Since the acquisition, the young enterprise has more than tripled its retail sales, spurred by investments and advertisements featuring many high-profile athletes, including Mike Trout, Mookie Betts, and James Harden. As a healthy alternative to more established competitors, these connections and advertisements have seen BodyArmor vault past Powerade, another Coca-Cola brand, as the second-largest sports drink company in the United States.

This acquisition comes during a relatively aggressive growth period for Coca-Cola. In recent years, Coca-Cola has acquired and invested in multiple companies, such as Costa Coffee, to diversify its portfolio. Coca-Cola has been on the hunt for companies they describe as “explorers,” which are brands that are “emerging, disrupting and gaining traction with consumers.” Once identified, Coca-Cola prefers to make only modest investments until they recognize the company as a challenger to the industry leader, at which point they move to gain full control over the burgeoning enterprise. Coca-Cola’s acquisition of BodyArmor fits this mold perfectly.

Despite Coca-Cola’s clear confidence in BodyArmor, it is unclear if BodyArmor can make a dent in Gatorade’s entrenched market dominance. Backed by decades of pedigree, familiarity, and loyalty, Gatorade has dominated the United States’ sports drink market for decades. Even after BodyArmor’s rise, Euromonitor estimates that Gatorade constitutes 68% of the sports drink market. Gatorade’s position is roughly triple the position occupied by Powerade and BodyArmor combined, a mere 23%.

Coca-Cola clearly sees the acquisition of BodyArmor as a means to combat Gatorade more effectively. Coca-Cola’s decision to invest unprecedented billions in this acquisition likely indicates a shift away from their prior focus on Powerade and toward the development of the BodyArmor brand. The question is, will BodyArmor be successful where Powerade has failed? The founder and current chairman of BodyArmor, Mike Repole, certainly thinks it’s feasible by as soon as 2025, though he concedes that it is extremely unlikely. If BodyArmor and Coca-Cola hope to achieve the incredibly ambitious goal of slaying the Goliath of Gatorade, the plan most likely to succeed would probably mimic Nike’s path to unseating Converse as the king of athletic sneakers.

Prior to the mid-1980s, Converse was the undisputed king of athletic sneakers. From the NBA’s founding through the 1980s, seemingly every game played in the NBA was an advertisement for Converse, America’s leading sneaker brand. The league’s greatest stars—including Wilt Chamberlain, Bill Russell, Jerry West, Magic Johnson, and Larry Bird—all wore and endorsed Converse sneakers. This all changed when Michael Jordan signed with Nike. Almost poetically, Michael Jordan, a Converse-wearer in college, signed with Nike and began the end of Converse’s stranglehold on the athletic sneaker industry. Nike threw the full weight of their advertising muscle behind the young Chicago Bulls’ star and, riding his overwhelming popularity, the company soon saw themselves soaring over their once rival Converse. Nike’s endorsements and innovative products, like their responsive Air add-ins and leather uppers, proved to be too much for Converse to compete with, and the symbolic conclusion saw Nike officially acquire Converse in 2003.

If BodyArmor is to successfully achieve its goal of becoming the number one sports drink seller in the United States, it should look to Nike’s model. Fortunately for BodyArmor, they have already positioned themselves well to do just that. The catalog of professional athletes that already represent the brand contains some of the most popular players within their respective sports. Furthermore, with Coca-Cola’s substantial investment, they should be better able to leverage Coca-Cola’s extensive distribution network to expand their reach and elevate their brand to a higher level. If there ever was a time, it would be now.

If BodyArmor follows Repole’s timeline, Coca-Cola will see the value of their investment sooner rather than later. It is unlikely that BodyArmor will achieve the lofty goal of becoming the number one sports drink in the United States, due to Gatorade’s staggering market share and brand familiarity. However, a Nike-like revolution led by high-profile brand ambassadors and innovative products could position them well. Coca-Cola has deemed BodyArmor worth an extremely costly investment—we shall soon see if it’s the brand that unseats Gatorade, the king of sports drinks.

After the financial crisis in 2008, Americans’ confidence in banks dipped to an all-time low and has remained low ever since. However, the crisis also opened an opportunity window for newfangled technological innovation businesses to enter the financial services industry and gain more customer trust. Companies like Square (SQ), founded in 2009, seized the opportunity to offer payment services at a lower price and faster speed than traditional banks could. Less than a decade later, Square is used by millions of small businesses to provide a seamless transactions system that accepts credit cards for payment, tracks sales and inventory, and allows customers to obtain financing. Traditional banks are keenly aware of this phenomenon and eager to stay competitive.

The fintech boom has disrupted the entire core of the banking business and has been reshaping the financial industry for the last two decades. As of 2021, there are 8,775 fintech startups in the U.S., with its most significant segment—digital payment—being valued at over $1.2 trillion in 2021. Quoting JPMorgan Chase CEO Jamie Dimon, “Fintech is an ‘enormously competitive’ threat to banks.” By developing narrowly defined but easy-to-use, intuitive, and highly effective solutions, fintech has managed to step into and take over segments neglected by traditional banks.

What can the traditional banks do to survive this challenge? One strategy is to acquire fintech firms to enhance the efficiency and speed of banking. JPMorgan pursued this strategy when it acquired wealth management startup Nutmeg and 55ip, a provider of automated tax-smart investment strategies. Another strategy is to make investments in fintech through venture capital (VC) investment. For example, Goldman Sachs, JPMorgan, Citi, Capital One, and others have acquired equity stakes in several startups in wealth management, capital markets, and cryptocurrency through VC funding rounds. Finally, the third strategy is to enter into a strategic partnership with a tech firm to leverage the expertise of both companies. Goldman Sachs’ partnership with Apple to issue a new credit card seems like a good template for such a model: Goldman brings in its financial and regulatory expertise, whereas Apple brings its technological prowess.

Ironically, while bank-fintech partnerships have become more common, some fintech lenders are in the process of bankification. Several notable digital lending companies that began with some form of partnership, wholesale funding or marketplace model are in some stage of shifting into a banking model. Square, SoFi, and Lending Club may be seen as pioneers in this movement, but we can expect to see more “chartering” activity as online lending overtakes brick & mortar lending originations.

Square now has its own lending license that it can use to issue business loans. The company obtained the Industrial Loan Company license from Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions. In contrast to Square, to obtain a national bank charter, Sofi Technologies sealed the deal to acquire Golden Pacific Bancorp, Inc. Similarly, Lending Club announced the completion of its acquisition of Radius Bancorp, Inc. and its digital bank subsidiary, Radius Bank (“Radius”) earlier this year.

Strategic corporate acquisitions of banks and fintech lending companies will undoubtedly expand the bank’s loan business by channeling the low-cost fund deposits to their fintech company. Although the loan growth might be higher, the yield might be lower as credit costs creep back up to normal levels and  become less attractive to the investor. Similarly, even though Fintechs will get a cheaper source of funds backed by strong institutional financial institutions, their return might also be lower.

Further, after acquiring a national bank, fintechs no longer need to apply for the fintech charter, the controversial charter that the Office of the Comptroller of the Currency (OCC) proposed back in 2017. With a national bank charter, fintechs can bypass states’ usury laws by applying the rate exportation rules, permitting them to “export” to out-of-state borrowers the interest rates that are permissible in their home states.

Regardless of the advantages of these acquisitions, there are some regulatory factors to look out for, such as any changes to “true lender” rules that might make it harder to originate loans via a partner. The true lender doctrine generally disregards the form of a lending arrangement and examines the substance to determine which entity is the actual, rather than the nominal, lender. On top of that, the fintech-bank acquisition trend might change the regulator’s perspective on future charter grants to fintech companies, and it might impose detailed financial requirements such as capital reserves.

While fintech has reshaped the financial services industry for the past decade and poses a substantial challenge to the traditional banks, the fintech-bank acquisition trend will continue to pressure the traditional players to embrace new strategies to reshape their business.

Despite corporate law firms’ calls for their commitment to diversity, the data on diversity at these firms paint a different picture. According to the National Association for Law Placement, a 2020 survey of 882 law offices showed that 10.2% of partners were people of color. In fact, the data showed 4.08% were Asian American, 2.10% were African American, 2.80% were Latinx, 0.18% were Native American/Alaska Native, 0.06% were Native Hawaiian/Pacific Islander, and 1.02% were multi-racial. The low numbers are also reflected on the partnership level, as big law firms’ share of women grew marginally from 24.2% in 2019 to 25.1% in 2020. Overall, the growth in diversity for people of color grew 0.65% from 2019 to 2020. Are corporate law firms’ recruitment and attrition methods for diverse talent working? Or are they failing due to a myriad of systemic issues that must also be addressed in its recruiting strategies?

Answering this question, Rufus Cormier, a retired Baker & Bots partner, found pursuing a specific legal career path was “a question of exposure and lack of knowledge.” Cormier asserted that most black lawyers were not viewing the transactional side of the law, but rather, identified law with litigation, especially criminal law. The scarcity of black lawyers can also be linked to trepidation with joining a work environment where they are the minority. Jill Louis, a managing partner of Perkins Coie’s Dallas office, faced this problem when she would be in the conference room full of white men, where she was the only one asked, “where did you attend law school?” These types of microaggressions illustrate why some underrepresented lawyers are not entering the big law space.

Nevertheless, there are ways for corporate law firms to achieve their mission of creating a more diverse and inclusive environment. As noted by Bloomberg Law, corporate firms can “put their money where their values are.” Some corporate firms have included diversity and inclusion goals within their annual performance review, while others have tied a component of their partners’ compensation to their diversity efforts. Bloomberg Law’s own Diversity Equity, & Inclusion Framework members utilized these methods, including Kirkland & Ellis LLP, Akin Gump Strauss Hauer & Feld LLP, and Covington & Burling LLP. Additionally, corporate firms can achieve diversity by “altering their traditional recruitment approaches.”

Recruiters from corporate firms should not only identify the historical roots for the lack of retention for diverse associates but also adapt their efforts accordingly. To address these systemic issues, recruitment should be looking to the beginning of the pipeline before diverse talent reaches law school. For example, the SEO Law Fellowship Program offers entering 1Ls a chance to work at a big law firm by including fellows in the summer associate program. While these efforts provide a meaningful opportunity that addresses the exposure problem Cormier raises, the data on diversity in big law illustrates that more must be done.

Further recruitment alterations include firms diversifying away from just the top law schools. This approach is supported by Lloyd Freeman, the chief diversity and inclusion officer of Buchanan Ingersoll & Rooney. Freeman stated recruiters should expand their focus by recruiting from underrepresented schools and historically black colleges. Such tactics allow firms to focus more on the “ability” of candidates, rather than their “credentials” or industry connections. To further address this exposure problem while in law school, it is crucial that firm recruiting collaborates with law school affinity organizations. In an industry where networking is crucial, firms can directly reach diverse applicants at law schools by working with these campus organizations.

Following the aftermath of the death of George Floyd and racial protests around the world, some firms including Dorsey & Whitney and Paul Weiss Rifkind Wharton & Garrison have taken measures to further foster diversity and inclusion. In a study done by the NALP and the National Business Institute, 73% of respondent firms stated they’ve created new programs to address racial injustice and civil unrest. These efforts are coupled with the overarching pushback from corporate clients. For example, Facebook has recently warned their big law firms that they will take their “work elsewhere or cut fees unless they see more racial and gender diversity within the law firms they work with.”

As an industry that has historically lacked diversity, corporate firms must identify ways to improve exposure and modify their recruiting strategies. These modifications include expanding their talent pool and providing earlier exposure to underrepresented groups. By doing so, firms can ensure their mission to a sustainable diverse workforce is fulfilled.

The Silicon Valley tech startup world is constantly evolving. The latest evolution, particularly during and post the pandemic, is the number of CEOs getting massive paydays in the form of special stock awards as these tech companies prepare to go public. Gone are the days when Silicon Valley leaders like Jeff Bezos and Mark Zuckerberg took little or nothing in salaries or stock options during an IPO and put their efforts solely into creating value-generating companies that helped benefit them eventually from the rising value of the stock. One would imagine that the highest-paid CEOs of public companies would be heading traditional giants of corporate America such as Pepsi or Microsoft, but in 2020, seven out of the top ten most valuable compensation packages of 2020 were given to CEOs of startups that listed in 2020.

Granted that most of this compensation is tied to performance and growth targets, it is essential that there remains transparency from the beginning and that these startups find a balance. Under California Law, executives of any company including founders have two basic fiduciary duties: the duty to take actions that are in the best interests of the corporation and the duty of taking such actions with care after carrying out reasonable inquiry. In addition to these fiduciary duties, managing organizational structures, strategy, and communication with all stakeholders across the board, founder CEOs are the brains behind these startups and are responsible for the overall success of their businesses. But the chaos caused by the founders of startups such as WeWork Cos Inc and Theranos Inc. should be a reminder that it is essential that legislation provide a more detailed roadmap apart from these two duties to keep founders accountable for their actions to protect the interest of the shareholders. With the monetary benefits usually skewed heavily in the favor of the founders, there must be boundaries and some form of cap to prevent such situations from occurring again. At the same time, it is also pertinent for the legislation to attempt to control the growing divide that hefty pay packages are creating between such CEOS, executives, and regular employees.

Obnoxious pay packages are a red flag, but investors and key backers believe that these pay packages are one of the most common methods to motivate founders, who commonly are the brains behind the show, to remain at the helm and to sustain rapid growth. Proponents of this argument claim that since these founders only receive most of their pay packages if the company grows substantially in terms of value, the benefit in fact is received by all stakeholders and shareholders. It is also beneficial to tie down key executives in the technology world, where employee turnover rate is the highest and the median tenure can be as little as one year. A number of investors also believe that since the tech companies rise under the leadership of their founders, it is worth holding onto the founder even if remuneration amounts go through the roof.

Former WeWork CEO, Adam Neumann, is a perfect example of rich pay packages that frustrated investors, venture capital funds, and destroyed standards of U.S. corporate governance that is expected of high-level executives of billion-dollar corporations. Elizabeth Holmes, disgraced founder of the now defunct startup, Theranos Inc., is another example of a high-flying CEO who violated all possible standards of ethics and corporate responsibility leading to numerous lawsuits and an eventual collapse of her startup.  With founders already having a significant amount of power, the large compensation packages tend to transfer payout costs to future public or non-public investors who have little or no say in such costs. They also lead to the growing pay divide between the executives and regular employees. In 2020, Alex Karp, co-founder of Palantir, received the highest compensation package of any U.S. public company on record since 2007. While his company has never posted a profit, Mr. Karp took home $1.1 billion, roughly 8,943 times the compensation received by his average employee.

In today’s free-market, direct policy changes made by the legislation to safeguard the actions of such CEOs, like lowering CEO salaries to ensure that their incentives remain aligned with the entire company might be labeled as draconian or an act of governmental overreach. But with tech stocks flying high during the pandemic and more money being poured into the industry, it is important to not forget the disasters of Neumann or Holmes. It is crucial that founders are constantly incentivized to keep their personal goals aligned with those of their investors and employees. When compensation is through a time-based or a milestone-based equity vested program, policy could be introduced to provide a system of checks and balances to ensure that prioritization of the milestone itself does not undercut securities regulations, fair trade practices, or violate standards of corporate governance. To tackle the growing imbalance of executive compensation, Kets de Vries, Dutch management scholar and founder of INSEAD’s Global Leadership Centre, has previously suggested the implementation of higher marginal income tax rates at the very top and high corporate tax rates for firms that have very high CEO-to-worker compensation ratios. The Economic Policy Institute even went as far as suggesting that firm’s shareholders should have a greater ‘say on pay’, a right to vote on top executives’ compensation.

Whether any of these policy changes will ever see the light of day is something that only time shall tell. But with the global economy becoming more and more transparent, it is time to focus the debate on the ever-burgeoning startup founder compensation packages and whether they contribute to a sustainable business.

After gaining enormous success with their video game Fortnite, Epic Games placed a heavy bet by initiating a lawsuit against Apple last August. Specifically, Epic challenged Apple’s iOS policy where Apple requires developers to bill customers through the App Store and charges a 30% fee on all purchase. Epic and other developers could either bypass Apple’s platform, lobby Apple to take a smaller cut, or give in to their high fees.

Before litigation, Epic created a “battle plan” codenamed “Project Liberty.” Their strategy was to compel platform owners—namely, Apple and Google—to amend their iOS and Play Store policy to eliminate the 30% commission fees. Epic proceeded to introduce a standard patch—a “hotfix”—into Fortnite to allow users to purchase in-game currency at Epic’s Games Store. Although the patch needed approval from Apple, Epic did not disclose this update and the new feature was approved.

But Epic didn’t stop there. The gaming company incentivized its customers to bypass the App Store and pay them directly by offering steep discounts. Because it was able to bypass Apple’s 30% sales fee, Epic could justify offering steep discounts for users that purchased directly through the Epic Games Store. Within a few hours, Apple removed Fortnite from its app store on the pretext that Epic had violated Apple’s terms of the service by proving its own payment option.  As a result, Epic resorted to legal action.

In their complaint, Epic claimed that Apple engaged in anticompetitive behavior by using its monopoly in the mobile device market to charge exorbitant fees and restrict alternative payment systems. Epic sought injunctive relief to allow fair competition in mobile app distribution.

After hearing arguments, Judge Yvonne Gonzalez Rogers ruled against Apple on the anti-steering provision which prohibits developers from directing users to third-party payment systems. The court issued a permanent injunction — in 90 days, “Apple will no longer be allowed to prohibit developers from providing links or other communications that direct users away from Apple in-app purchasing.” Additionally, Judge Rodgers held that although Epic had not provided sufficient evidence to prove that Apple has violated federal or state antitrust laws, Apple had violated the California Unfair Competition Law.

This ruling leaves the door open for future antitrust complaints against mobile app platforms. Hinting at such possibility, Judge Rodgers concluded that “[t]he evidence does suggest that Apple is near the precipice of substantial market power, or monopoly power, with its considerable market share.” If Apple’s market share was higher, or if Epic narrowed in on this issue in its complaint, the ruling may have caused Apple more trouble than it currently has.

So far, the aftermath of this ruling has seriously impacted Apple’s Store sales, which grossed an estimated $64 billion in 2020. After the court’s decision, Apple stock suffered a 3% drop in intraday trading. The data shows that Fornite players generated an estimated $700 million of total revenue on iOS devices before the game was removed from the App Store. Epic paid Apple $237 million in total commissions for Fortnite between January 2017 and October 2020. Now, Fortnite is still not available on iOS and both the parties are hustling in appeal courts to seek their respective remedies. Will Apple reassess how its relationship with developers and how it monetizes the App Store? Or will Epic’s potential demise serve as a warning to other challengers?