Mark Twain famously claimed that “history doesn’t repeat itself, but it often rhymes”. Whether or not Evergrande—the second largest property developer in China— emerges as a ‘Lehman moment’ is yet to be determined. The world in the wake of a global pandemic and after decades of expansionary monetary policy, awash with debt. News headlines in the United States are questioning if Secretary of the Treasury Janet Yellen should mint a $1 trillion coin to prevent a debt default; the debt to GDP ratio in the EU sits at 92.5%; finally, Evergrande is highlighting a potential debt crisis in China. Time will tell which of these three major economies will give birth to what would be difficult to call a black swan event, as the signs of a debt epidemic have been there for some time. China’s economy is currently facing the potential repercussions of using leverage to build the strongest economy in the world, but the adverse effects could be troubling for many.

China is perhaps on the fastest trajectory to industrialize in history. Deng Xiaoping designated a small fishing village called Shenzhen as China’s first special economic zone in the 1980s; now, Shenzhen is home to 18 million people, the world’s 4th busiest container port and a direct competitor to Silicon Valley. Shenzhen, the site of the second most skyscrapers in the world, is also connected with other cities in China, such as Shanghai which holds the fifth most skyscrapers in the world, by high-speed rail or a quick visit to the airport. As such, it’s clear that China’s economic growth is both realized and personified by infrastructure.

Without companies like Evergrande, which offer both home ownership and housing to millions this miracle industrialization may not have been possible. However, this growth was predicated on cheap borrowing and massive spending. The timeline of borrowing to construction was so fast that many housing units in China are unoccupied, up to 20% according to Bloomberg. This is problematic to the cash flow and books of property developers, such as Evergrande. Moreover, a major caveat is that growth in the Chinese context is complicated as the state is heavily interwoven with the private sector to the extent that both could be argued to be synonymous. This has led growth to be coordinated but uneven, and potentially painful for both the public and private sector going forward.

Some  financial pundits have argued that Evergrande is not a Lehman moment but a localized problem confined within the borders of China. However, this is a rather naïve approach. The world economy is more interconnected than ever, even in the wake of protectionist policies. Moreover, China’s response will serve as a signal to the rest of the world as to whether to follow a similar path to solve financial issues – this could have a profound effect on global spheres of influence.

How will the Chinese government act? Evergrande can be both a catalyst of impending crisis and indicative of a slowing overleveraged economy. China’s manufacturing indexes are all down on the year. Further, as previously mentioned, the supply of housing has outpaced demand. The Chinese government is fully aware and trying to ‘deleverage’ the economy to equalize supply, demand, and growth. However, historical rapid expansion has created a monster that may be impossible to contain without incurring collateral damage. The New York Times claimed that “China’s growth is slowing, and the government may have to work harder to rekindle it.”

Due to the strong relationship between big business and the state, Evergrande could be “too big to fail.” If the Chinese government lets Evergrande fail, it could cause ripple effects felt within both Chinese and foreign markets. If Evergrande defaults, and goes bankrupt, then other companies in a similar position are likely to do the same, and insurance companies, other financial firms, and eventually the whole Chinese economy could come crashing down as well.

If Evergrande is bailed out, it will be hypocritical to China’s goals of deleveraging. However, most importantly, China’s response will reveal their political economy model. The Chinese government has already restricted their tech industry to align more with the values of the communist party, rather than free capitalist markets. The Chinese government will need to make a choice whether to avert economic disaster through socializing the failure of Evergrande or will the government take the ultimate capitalist approach and let it fail.

China’s approach will set the tone for the coming decades. Evergrande has the potential to grind China’s economic miracle to a halt and stop growth going forward. China has too many overleveraged companies in key industries, and the fact that the government recognizes this highlights the potential scale of the problem. As western governments argue how much more debt to take on, with no contradictory argument hitting the headlines or policy debates, China is aware of a deep problem that can unravel their markets. The jury is out on whether Evergrande will be China’s black swan event. For now, it is most certainly an ugly duckling.

Remember Laszlo Hanyecz? The guy who bought two Papa John’s pizzas for 10,000 Bitcoins (BTC), which at the time was only worth $30? Today, those same Bitcoins are worth around $550 million. You can probably see the problem with this. A currency should act as a medium of monetary exchange and a mode of storing monetary value, which ideally, should remain relatively stable. But because of instability in their value, cryptocurrencies such as BTC and Ethereum (ETH) for instance, suffer serious price fluctuations that make them hard to adopt. Would you adopt a cryptocurrency if you knew that tomorrow you could end up like the pizza guy? Certainly not, which is why there is another type of ‘cryptocurrency’ called stablecoins.

Stablecoins are digital coins that promise to maintain their worth by attaching their value to the U.S. Dollar or any other asset. Basically, they mimic the U.S. Dollar digitally through blockchain technology, and hence serves as a safe and stable coin. The largest stablecoins: Tether, USDC, and Binance USD all try toback against fiat currency (USD). However, other types of stablecoins are backed by gold, oil, cryptocurrencies, or through algorithms (by controlling the supply and demand). These stablecoins do hold advantages to consumers, such as instant transactions as opposed to banks. Since it maintains its value against the U.S. Dollar, people can use it to transact with each other 24/7 without a bank acting as an intermediary.

The current market cap of stablecoins is exponentially increasing, it currently rests around $130 billion, where they are backed by assets such as the U.S. Dollar, US Treasuries certificates of deposit, short-term debt, corporate bonds, and more. Given such size and potential impact to the financial system, stablecoins continue to come under scrutiny by regulators. Regulators fear that Stablecoins are vulnerable to a ‘bank run’, where large number of investors rush to redeem them, forcing sponsors to sell the assets at fire sale prices and consequentially stressing the financial system, similar to what happened to money market mutual funds during the 2008 financial crises. Therefore, regulators are rushing to put into place robust legal and economic frameworks to protect the financial market as well as consumers.

Stablecoin regulation should include essential components to protect the financial system such as creating types of reserve assets, ensuring issuers honor direct redemption claims, and establishing limits on risk maturity transformation activities. In addition, reserve segregation and coin holder claims in bankruptcy or insolvency should be honored. But questions remain on how we should regulate Stablecoins, and indeed, who should even regulate them– questions that have proven especially challenging in consideration of the need to balance the interests of different stakeholders and the financial system itself.

For Stablecoins to be regulated, they need to be classified into a certain category. However, creating a new category for crypto assets altogether may be more ideal. Because Stablecoins are not treated as deposits, the Federal Reserve (Fed) and the Office of the Comptroller of Currency have limited oversight. The Securities and Exchange Commission (SEC) also has limited authority unless the Stablecoins are classified as securities. If they are, they will be subject to bigger disclosure requirements. But paradoxically, such classification might not be of importance due to the Fed’s willingness in issuing a Central Bank Digital Currency (CBDC) or more simply a digital dollar, which might be introduced to a separate category of regulation. The CBDC would make money directly available to the public, hence, increasing outreach to people with no access to the financial system. The CBDC’s innovations however, can coexist with the current Stablecoin market, as the Fed can issue coins, while the private sector can build rails and applications. But the magnitude of dealing with millions and maybe billions of users is increasingly over the Feds power and capabilities. Therefore, this might also indicate a radical change to commercial banking soon if they do not adjust accordingly.

The US needs to catch up as China has already cleared over $5.3 billion in transactions through its digital renminbi. While it may be tempting to preserve the status quo, blockchain technology can reshape market structure and improve competition if regulated properly. Adopting digital currencies, such as Stablecoins, provides ease in transactions, convenience for unrepresented minorities in the financial system, and acts as a direct bridge between central banks and people. Maintaining the status quo within the era of rapid technological innovation, hampers competition and innovation, forcing individuals to shift to the new unregulated financial system. The question for central banks and regulators is which approach can improve competition, lower cost, and increase access to the financial system. Afterall, regulatory frameworks will define if and when the technology can deliver on its potential.

For many working professionals, the pandemic exacerbated pre-existing challenges to their mental health and well-being, and attorneys were no exception. In efforts to counter the additional stress, most firms expanded mental health resources, experimented with flexible working arrangements, and many provided parents and caregivers with additional support. Research shows that lawyers are most motivated, engaged, and less likely to leave if their firm successfully fosters a collaborative culture that in which employees feel supported and respected. Studies indicate that, at its core, creating a workplace in which employees thrive revolves in great part around prioritization of employee well-being, as well as encouraging and modeling work-life balance. However, many attorneys struggling with mental health cite arduous billable hour requirements and impossible deadlines and expectations—what many would consider hallmarks of the profession—as irreconcilable with the very aims of these mental health initiatives. Are pandemic-era wellness initiatives here to stay, or are they simply incompatible with the nature of such a demanding profession?

A change of this magnitude would require that firms look beyond offering employees a free mental health app subscription, but rather, a commitment to redefining long-established approaches to advancement and reward. Slowly but surely, it appears that some firms have begun taking significant steps to dismantle the tension between attorney wellness and one of the pillars of the legal profession: the billable hour. For example, McDermott Will & Emery has begun to compensate attorneys for prioritizing wellness by offering billable-hours credits for mindfulness sessions, lawyer-led meditation, and other wellness activities. During the pandemic, Orrick, Herrington & Sutcliffe made headlines for allowing attorneys who are caretakers for their family to work at 80% of their pre-pandemic capacity at full compensation.

Transformation of an institution’s established culture and values also requires clear signals from firm leadership. Some firms have begun to implement formal boundaries that encourage employees carve out personal time. To ease added strains that come from the blurring of home and work, Orrick instituted a formal expectation and policy that all attorneys and counsel are to make use of 40 hours of bonus-eligible time to “unplug.” To reduce the burdens of weekend work, Orrick also formally discouraged the scheduling of non-time sensitive meetings on Friday afternoons. Dentons promotes a similar idea with its “no meetings week”, in which the firm encourages attorneys to cancel meetings to allow attorneys to step away from work without the fear of falling behind.

The strain between attorney wellness and the profession’s established work practices is likely to be a focus even after the pandemic fades into the background given that the industry’s intensifying war for talent. The fierce competition is likely to compel firms to look past unsustainable salary raises to attract and retain associates. Further, as the industry adapts to rising client demand for diverse teams, firms will also have to take a closer at how to ease the additional mental health challenges that women and people of color face in the workplace.

While it is true that criticism of the profession’s foundational practices continues to grow,  the pillars of the legal profession will not be easy to topple. It is clear, however, that rumblings of deep cultural change can already be heard. Could it be that an institutional transformation of the profession is on the horizon?

With less than six months on the job as the chairman of SEC, Mr. Gary Gensler has introduced a sweeping agenda that aims to squeeze Wall Street’s profit margins, crack down on crypto, and address new issues in retail investment. While some doubt how effective the SEC will be at enforcing Gensler’s agenda of roughly fifty new rule-making items at once, the opposition hasn’t stopped Gensler’s campaign of reform.

Many of Gensler’s policies aim to protect investors from big finance, and Gensler’s resume demonstrates he has a history of advocating for ordinary investors and their rights, despite ties to the financial industry. Before going into public service, Gensler was a partner in Goldman Sachs’ Mergers & Acquisitions group. However, he left in 1997 to join President Clinton’s Treasury Department and, after leaving Treasury, he co-wrote a book that stringently criticized the mutual fund industry. More recently, he led the Commodity Futures Trading Commission under President Obama and developed a reputation as a “hard-charging” regulator. During his tenure, he wrote dozens of rules to govern the vast swaps market which had previously been mostly unregulated and contributed to the 2008 financial crisis.

However, this much isn’t new for the SEC — protecting Main Street from the rampages of Wall Street is part of the agency’s mission. What distinguishes Gensler and his regulatory changes from the past chairs is his goal of protecting investors through new policies addressing concerns about high-speed trading and online brokerages.

Gensler’s primary target to address these concerns is “payment for order flow.” Payment for order flow, the practice of transferring some of the trading profits from market making to the brokers that route customer orders to specialists for execution, allows Robinhood Markets Inc. and other online brokerages to make commission-free trading available to retail investors. To do this, Robinhood sends its clients’ orders to high-speed trading firms such as Citadel Securities instead of a stock exchange. (High speed trading is a trading strategy that involves buying and selling financial securities at a very high-speed using algorithms.) The trading firms pay Robinhood for sending them the orders, and then profit from the difference between the buying and selling price of the shares being transacted.

The critics of payment for order flow, including Gensler, argue that this process poses a conflict of interest for brokers and reduces transparency in the market by channeling data away from exchanges. SEC has also expressed its concern that payment for order flow and internalization contribute to an environment in which quote competition, instances of specialists trading through a better quote on another exchange, is not always rewarded.

However, Citadel Securities and Virtu, two of the market makers that dominate this business, say they often execute trades at a slightly better price than exchanges and save money for investors. “Concerns about concentration and conflicts are theoretical,” said Douglas Cifu, the chief executive of Virtu. “The actual results are overwhelmingly beneficial to individual investors.”

In August 2021, Gensler stated that he was open to banning payment for order flow altogether, which is a practice that accounts for the majority of online brokerages’ revenue.

Gensler has also criticized the new generation of brokerages for using data analytics to study how clients behave instead of appointing human brokers to take orders from clients and recommend investments directly. “While these developments…can increase access, increase choice, and lower costs, they also raise new questions about potential conflicts, biases in the data, and yes, even systemic risk,” Gensler told the Senate Banking Committee in September.

While many brokerage companies argue that heightened regulations of payment for order flow would result in increased compliance costs and materially decrease their transaction-based revenue, some, including their clients, believe otherwise. For instance, Kenneth Griffin, the founder of Citadel Securities, said that he would be “quite fine” if payment for order flow was banned.

Ultimately, while it may be lucrative for retail brokers to use this practice of providing zero commission stock and options trading to their clients, this process is now heavily scrutinized by regulators and some changes are inevitable. Opponents of this practice argue that it passes hidden costs to investors and generates volumes of data that firms can use to track the market. Rather than banning payment for order flow outright, Gensler’s regulatory agenda could be achieved by implementing disclosure requirements which require brokers to be more transparent and publicly disclose to retail investors how they profit from the arrangement. Though a disclosure-based approach may take longer to achieve Gensler’s agenda than some investor advocates had hoped, it would allow for more fine-tuning than a complete ban.

Additional disclosure requirements would require brokers to adjust their practices and business models. In the long run, this approach would cut costs for the market, help ordinary investors save money by making them more conscious in their choices, and could also benefit financial institutions as additional disclosures and transparency would lead to reduced scrutiny by the regulators moving forward. Furthermore, a changeable disclosure regime to address payment for order flow would free up Gensler and the SEC to focus on bigger and more important issues including climate change and promoting social benefits through securities regulation.

For those fearful of needles, the biotech company Theranos seemed to provide the cure. Theranos, valued at $9 billion in 2015, promised to revolutionize blood testing by using small amounts of blood through a finger prick to scan a bank of 240 diseases and help diagnose a patient. Apart from being a saving grace for people fearing needles, Theranos promised to make healthcare more efficient by increasing the speed and portability of blood testing. However, the excitement for this new technology came crashing down once news broke that the founder and chief executive of Theranos, Elizabeth Holmes, was indicted for fraud. She allegedly misled investors and provided falsified blood test data to customers and investors. Now, she could ultimately face up to 20 years in prison and lose millions of dollars.

Recently, a New York Times guest article by the former reddit CEO Ellen Pao asserted that due to sexism, Holmes is being held accountable more harshly than her male counterparts. To support her opinion, Pao draws the comparison between this case and the unethical actions taken by companies such as Juul and Facebook. The e-cigarette company Juul, led by CEO Kevin Burns, was under investigation for marketing the technology to children, which contributed to the rise in youth nicotine addiction. Facebook, led by CEO Mark Zuckerberg, was under investigation for failing to limit hate speech on their platform, which arguably played a substantial role in the Myanmar genocide. Pao argues that since the CEOs of these companies only faced financial consequences for their misdoings, they were not held publicly accountable in the same way as Holmes.

However, Pao overlooks a significant distinction between Holmes’ case and these two cases that explains the accountability inconsistency. Our legal system distinguishes between immorality and illegality — Holmes acted illegally and unethically, whereas Juul and Facebook acted unethically but not illegally. Although Juul and Facebook’s actions resulted in consequences arguably worthy of punishment, their actions were not illegal.

For the most part, executives in similar situations to Holmes are being held legally accountable irrespective of their gender. For example, the founder of electric vehicle startup Nikola, Trevor Milton, is currently in court for misleading investors and could also face a prison sentence of up to 20 years. Similarly, the CFO of energy giant Enron, Andrew Fastow, committed fraud by hiding the company’s losses and faced a sentence of 6 years in prison in 2004.

Nonetheless, Pao is right that there is a blatant aspect of sexism in Holmes’ case. But this has much more to do with how the media is covering her rather than her legal accountability. The media, for no good reason, has focused on Holmes’ fashion style at trial and the depth of her voice at work. In a technological world dominated by men, women are scrutinized for their personal attributes while men evade similar scrutiny.

When a woman like Holmes breaks the glass ceiling, both the acclaim and criticism are more pronounced. There is great pomp and circumstance for the accomplishments of women, but when they commit an illegal and unethical act comparable to those of their male counterparts, the stigma is more severe. While male leaders have a chance to recover after their punishment, the media’s coverage of Holmes will create a reputational stain much harder to remove.

Sexist scrutiny means that, unfortunately, the stakes are much higher for women leaders: the basic rules of the game may be the same, but the audience is much harsher when it comes to foul play by women.

New Zealand is set to become the first country in the world to mandate that financial firms report on the environmental impact and exposure of their investments. From 2023, companies must report on how their lending and investments effect ongoing efforts to reduce carbon emissions. They must also divulge the extent to which their investments are exposed to climate-related risks and opportunities. According to James Shaw, New Zealand’s Minister of Climate Change and Co-leader of the Green Party, “This law will bring climate risks and resilience into the heart of financial and business decision making.”

The legislation, which will affect around 200 domestic and foreign firms with assets totaling over $703 million U.S. dollars, is part of New Zealand’s broader effort to set ambitious environmental targets for its public and private sectors. The country recently overhauled its Resource Management Act, one of the world’s first laws focused on sustainable management. In its place will be three separate pieces of legislation, one of which exclusively focuses on New Zealand’s response to climate change. Proposed plans include switching to environmentally friendly farming practices, reducing livestock numbers, taxing farmers for emissions, and planting more permanent, native forests. The country aims to be carbon neutral by 2050.

New Zealand is tiny and comprises only 0.17% of global emissions. However, on the issue of climate change, the country sees itself as a role model for the rest of the world. Indeed, regulators in Europe have also start to turn their attention towards banks and asset managers that are too exposed to climate-related risks. Last November, the European Central Bank announced that it will start assessing how banks should account for real estate holdings vulnerable to climate related risks like flooding, and storms.

In general, governments and corporations seem more willing than ever to consider new legislation and taxation to tackle climate change. Earlier this week French lawmakers voted to ban short haul flights where the same journey could be taken by train in less than 2.5 hours. Similarly, after receiving government bailout with provisions to cut its carbon footprint, Austrian Airlines replaced one of their shorter routes with increased train services. In the U.S. JP Morgan and Goldman Sachs have launched plans to reduce investments in the fossil fuel industries, and better align their financial activities with the Paris Climate accord. Also this week, more than 300 corporations, including Target, Verizon, and Google, asked President Biden to double the emissions targets set by the Obama administration. According to Anne Kelly, vice president for government affairs at sustainability nonprofit Ceres, “this signals a major shift in the corporate community’s understanding of the urgency of climate change as a systemic financial risk.”

Back in New Zealand, the one-of-a-kind bill is expected to receive its first reading in parliament this week. And it’s likely that still more ambitious legislation is on the way. Shaw, chief architect of the country’s plans to fight climate change doubts that global heating can be restrained, but, he says, “that’s all the more reason to try.”

On Monday, Treasury Secretary Janet Yellen called for a global minimum tax rate for multinational corporations. Yellen criticized the “race to the bottom” approach to corporate taxation that has been adopted for decades as statutory tax rates have continuously fallen for forty years from an average rate of 40% in 1980 to the current average of 24%. Also, she emphasized the operation of companies within a global economy where the fortunes of countries around the world are intertwined. When considering a taxation strategy, countries have to prioritize revenue collection, protecting domestic industries, attracting foreign investment, and tax efficiency. But with the globalization of corporations and the increase in companies built around intangible capital, taxation has become increasingly difficult. It is estimated that governments miss out on between $200 and $600 billion in revenues each year due to tax havens and the use of tax loopholes.

The Organization for Economic Cooperation and Development (OECD) has been working for years on developing a global minimum tax and now over 135 countries are supportive of the concept. From these discussions several debates emerged, such as whether companies should be taxed based on where their headquarters are located or where the income is earned and how digital companies should be taxed. To try to resolve these questions the OECD has proposed a framework for a global minimum tax where businesses are taxed based on the location of their customers rather than the location of their headquarters. This structure would lead to more taxation of U.S. tech companies in Europe and other countries (but less taxation in the U.S.) while the U.S. would be able to raise more taxes from European and other companies selling to American consumers. Additionally, Yellen told her counterparts at a G20 meeting in February that the U.S. would no longer demand a safe harbor rule that would allow U.S. tech companies to opt out of paying this tax overseas, dropping a major point of the Trump-era negotiations that served as a roadblock to an agreement.

In her speech, Yellen highlighted the need for governments to have tax systems that enable them to raise revenue for investment in public goods and crisis response measures. This sentiment reflects how Yellen’s advocacy for a global minimum corporate tax rate is tied to the Biden administration’s push for the $2.3 trillion infrastructure proposal. President Biden has proposed to pay for the eight years of infrastructure spending with higher corporate taxes. While the 2017 tax overhaul cut the corporate rate from 35% to 21%, Biden plans to raise the rate to 28% and impose a 21% tax on U.S. companies’ foreign profits, which is designed to limit the benefits from loading profits into low-tax countries. While supporters say the tax increase must be viewed with respect to how much domestic companies and the American people stand to gain from the infrastructure proposal, critics urge caution under the belief that a higher tax rate will hurt U.S. companies’ ability to compete with foreign companies facing lower rates of taxation. This criticism underscores the importance of a global minimum tax rate as a way to shrink the potential tax advantage of foreign companies by requiring other countries to increase their corporate tax rates.

A higher domestic corporate tax rate obviously cuts into the profits of businesses, but analysts see the increase in taxes as costing some companies more than others. Those with a high proportion of domestic earnings are more directly impacted by the rate increase while multinational corporations will feel the effects of the minimum tax on foreign income. The primarily domestic companies that are most likely to endure some losses are essentially the same companies that benefitted most from the 2017 corporate tax rate cut, including utilities, regional banks, and retailers. There is concern that a tax increase would cut into corporate profits just as the economy is starting to recover from the pandemic. For instance, retailers are heavily reliant on domestic income and have experienced lots of struggles with the rise of e-commerce and the pandemic’s limits on in-person shopping. However, companies hit hardest by the pandemic will not feel any immediate changes from the tax increase because businesses pay taxes only when they have profits. Also, struggling companies would be able to carry those losses forward to offset future taxes.

As an alternative to the Biden tax proposal, Senators Wyden, Brown, and Warner have drafted a framework that is more friendly to companies but still leaves many details to be ironed out. The focus of that proposal is how U.S. companies should be taxed on foreign income and how foreign companies should be taxed on U.S. income, but issues such as the actual rates are still up for discussion. Republican lawmakers have indicated that they do not support a corporate rate increase (despite their concern about the national debt) and pushback from more moderate Democrats, like Senator Joe Manchin, reflect a 25% rate as more realistic than the 28% the Biden administration favors. But what needs to be remembered in the coming discussion over rates is that prior to 2017 the corporate rate was 35%, providing proof that corporations can exist – and even thrive – in a world with a much higher corporate rate.

Finance ministers during a G20 meeting this past week said that they hope to agree on a global minimum tax by the middle of this year. And with Yellen’s concerted efforts to re-establish America as a global leader engaged in shaping the world’s economy that ambitious goal might be reached.

The IRS is pursuing Bristol Myers Squibb for allegedly using an abusive offshore tax shelter to avoid paying nearly $1.4 billion in U.S. taxes. The agency claims that Bristol Myers, which is headquartered in New York, moved intellectual property to offshore subsidiaries in violation of U.S. profit-shifting rules. The existence of the inquiry only became available after the IRS published a document detailing the arrangement that inadvertently contained ineffective redactions.

In 2012, Bristol Myers implemented a tax strategy whereby the company moved patents and other intellectual property to Irish subsidiaries. The arrangement sharply reduced Bristol Myers’ U.S. tax liabilities: during the three years before Bristol Myers implemented the arrangement, the pharmaceutical company’s tax rate was close to 24%. After the company moved patents to the Irish subsidiary, however, Bristol Myers paid an effective negative 7% tax rate in the United States. The company’s offshore tax scheme was described as particularly aggressive because the IRS recently challenged similar schemes attempted by General Electric, Merck, and Dow Chemical.

Public knowledge of the IRS’ inquiry into Bristol Myers’ tax arrangement came about by chance. The IRS routinely drafts reports detailing complex audits and publishes redacted versions online with anonymized taxpayer information. Bristol Myers’ report, however, contained superficial redactions that could be removed. The disclosure of the Bristol Myers’ tax shelter comes as the Biden Administration has put the spotlight on multinational companies shifting profits abroad. President Biden’s tax plan proposes increasing the corporate income tax rate, increasing tax revenues derived from a U.S. corporation’s foreign profits, and establishing a global minimum corporate tax rate to prevent companies from diverting profits to foreign tax havens.

For over a century, the National Collegiate Athletic Association (“NCAA”) has served as the regulatory body that governs the majority of intercollegiate athletics. The NCAA and its member institutions provide a platform for almost half a million student-athletes to compete in 24 different sports across three divisions. Undoubtedly, the NCAA’s system has provided millions of educational opportunities for student-athletes that would not otherwise exist, but at an enormous cost to those the student-athletes.

The NCAA’s eligibility requirements for student-athletes to compete are based on the principle of “amateurism” – an arbitrary definition created and implemented in the NCAA’s Bylaws. In order to remain eligible, student-athletes must adhere to a laundry list of NCAA Bylaws, including the requirement not to receive any form of payment for their athletic skill. The NCAA has attempted to justify this decision by continuously stating that lack of pay for intercollegiate athletes marks a definitive point of demarcation between “amateur” and professional athletics. On the surface, this seems like a plausible defense: ensuring that student-athletes do not receive pay certainly does make intercollegiate athletics separate and distinct from professional sports. However, if this is indeed what distinguishes the NCAA from other leagues like the National Football League, then why do carve-outs—such as allowing student-athletes to receive pay for Olympic accomplishments or tennis athletes to accept prize money based on place finish or performance—exist?

A simple answer exists: to maintain control of their monopsony enterprise. The NCAA has become a multi-billion-dollar business, raking in lucrative television deals in excess of $8.8 billion. Rather than sharing those profits with the athletes who produce the NCAA’s notable product, the NCAA shares that wealth with the member institutions, including at least 20 schools that already possess endowments north of $5 billion. As a nonprofit organization, like its member institutions, the NCAA currently generates over $1.1 billion in annual revenue. Yet, none of those profits are shared with the individuals who are the lifeblood behind that revenue—the student-athletes.

Despite these shortfalls, there may be light at the end of the tunnel for student-athletes. On March 31, 2021, the United States Supreme Court heard oral arguments in NCAA v. Alston – the first time since 1984 that an antitrust claim against the NCAA reached the nation’s highest court. Stemming from a Ninth Circuit decision that found the NCAA and its member institutions’ limits on education-related benefits was a violation of the Sherman Antitrust Act, the implications of the case before the Supreme Court may further jeopardize the NCAA’s business model.

Although the NCAA v. Alston case surrounds education-related benefits, depending on the Supreme Court’s decision, the landscape for student-athletes and their fight for pay could drastically change. First, suppose the Supreme Court does in fact rule in favor of the NCAA’s position. In that case, there is the potential to create a de facto antitrust exemption for the NCAA, forbidding antitrust scrutiny and challenges brought against its rules and regulations. This decision would derail student-athletes’ aspirations to receive compensation for their athletic skill in the future. Alternatively, if the court rules in favor of the student-athlete side, it could mark the end of the fictitious “amateurism” standard the NCAA is adamant on retaining.

Under the current Ninth Circuit ruling, student-athletes can receive unlimited education-related benefits, including paid post-graduation internships. This decision, alongside the increasingly widespread legislation enacted by states that permits collegiate athletes to profit from their name, image, and likeness, may force the NCAA to change their business model much quicker than they anticipated. What may be a coincidence—or possibly a sign of the impending changes destined to occur—NCAA President, Mark Emmert, met with several NCAA athletes on April 1, 2021, to discuss the athletes’ request for a temporary waiver permitting them to receive compensation from endorsements next academic school year. These attacks on the NCAA’s business principles show no signs of slowing down, and in fact, continue to gain more traction. Depending on the outcome of the NCAA v. Alston case, the NCAA could suffer a devastating blow to its illustrious revenue stream it has fought so hard to keep away from student-athletes.

Embroiled in yet another legal debacle, as of December 2020 Goldman Sachs Group Inc. (Goldman Sachs) is immersed in a securities class action litigation in front of the United States Supreme Court – Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System.

Beginning with the financial crisis in 2007 – 2008, Goldman Sachs’ shareholders lost millions of dollars after the bank successfully marketed “a synthetic collateralized debt obligation” (CDO) known as “Abacus” that ultimately failed and led to a widespread Securities and Exchange Commission (SEC) investigation. Goldman Sachs neglected to inform shareholders of the investment’s unlikelihood to yield strong returns, and instead ignored clear conflicts of interest and relied on vague, overly broad ethics statements to convince investors of their effective transparency, corporate governance, and accountability mechanisms. Goldman Sachs had reason to know that the hedge fund manager who played a part in orchestrating the portfolio “of subprime mortgages” wagered the investment would fail. The CDO’s collapse led to a $1 billion payout for the manager, and a comparable loss for Goldman Sachs customers, further exacerbated by the negative impact on the stock price from the SEC investigation.

This inundation of financial jargon, and summary of Goldman Sachs’ decade-long flirtation with securities fraud, culminates with the ensuing class-action litigation involving the Arkansas Teacher Retirement System as well as a pension fund – two entities devastated by the impact of the failed investment and allegations of fraud.

The litigation addresses the legal question of “whether a securities defendant can rebut a presumption that the class relied on alleged misleading statements by pointing to their generic nature.” The Court’s holding will impact class action procedures such that future plaintiffs could more easily bring, and win, securities-fraud lawsuits by referencing major corporate entities’ blanket language regarding their integrity, transparency and honesty towards shareholders. At the risk of espousing dangerously anti-capitalist views, it is worth noting that such a holding could “open the floodgates” for costly and arguably unnecessary litigation or rather incentivize companies to “stay silent.”

As noted by several experts, this litigation begs the question: how will the future holding impact the rigidity, efficacy and enforceability of corporate governance and legal ethics practices going forward? But as a current first-year law student, and a shareholder and future shareholder, I cannot help but ask how this litigation – and the light shed on such opaque governance and financial practices by leading corporations – will impact the actions of the everyday investor. And, perhaps unrelatedly, it makes me wonder how phenomena out of our control, such as a global pandemic, could potentially influence companies’ likelihood to mislead investors for the sake of healthy portfolio performance to benefit the elite?

Over the past thirty years, class-action securities fraud cases dramatically increased, with the hope of compensating victims of misleading statements and deterring additional fraudulent activity. With a more conservative Supreme Court majority, potentially inclined to direct the resolution of these complex issues to the legislature, how will the holding of this case impact the already tenuous relationship between corporate entities and their shareholders?