Corporations acquire companies for a variety of motives which often affect the success of a merger. A merger can increase the value of a corporation by spreading the fixed cost of production over a larger output or by spreading the cost of expertise over a wider range of employees. Alternatively, successful mergers may align supply chains by integrating supply, manufacturing, and sales to lower costs of production. Mergers can even be effective disciplinary tools when they are used to replace bad managers.

Some acquisitions do not create value, but instead shift value from stakeholders to shareholders. When companies buy competing businesses and push out competitors, they can then institute monopolistic pricing. This shifts value from consumers to shareholders by raising costs for consumers and passing the profits on to company shareholders. Conversely, inefficient, unproductive mergers shrink company value when there are overconfident evaluations of corporate synergies or when companies seek to build name recognition and brand awareness but sacrifice value through careless empire building.

Elon Musk claims his recent acquisition of Twitter “help[s] humanity.” While this is a noble goal, it is a very vague one. Musk argues the acquisition creates a forum for people to freely speak their minds. He clarified that Twitter would not become a free-for-all unfiltered environment, and that Twitter must “adhere to the laws of the land.” Despite these assurances, Twitter’s advertising clientele remains unconvinced. While social media sites like Facebook have rebounded from advertising boycotts, Twitter faces an uncertain future as companies may raise concerns that their ads would be shown alongside objectionable content.

Twitter’s advertising quagmire is not their only problem. Companies are questioning the validity of Twitter “verification,” which can now be purchased by any Twitter user willing to pay $7.99 a month. This defeats the purpose of Twitter verification: signaling the legitimacy of the account owner’s identity. Corporate spoof accounts cause confusion and chaos, demonstrated by one account impersonating the pharmaceutical firm Eli Lilly & Co. that announced that insulin would be free. In addition, fake politician accounts have flared prejudice and tension with inflammatory tweets, like a spoof account of George W. Bush tweeting an attack on Iraqis.

Despite Musk’s promise that acquiring Twitter was not about the money, he cannot ignore the reality of running a social media empire, which entails hefty monetary expenditures. Musk claims to be working tirelessly to balance the needs of his existing ventures, SpaceEx and Tesla, with his new venture in Twitter. This is critical because Musk intends to keep many of his employees as shareholders, giving him his own set of fiduciary duties. At this point, it is unclear what direction Musk plans to take the site, and such uncertainty could have been avoided with a clear cut strategy from the acquisition’s outset.

While the future of Twitter remains uncertain, Musk has indicated his plan to have someone else run the company. It is unlikely Twitter will be realized as the paradigmatic public forum Musk hoped it would be. The reality is that the company will need to have enough stability for advertisers to support its existence.

After years of unprecedented growth, the tech industry has recently come to a slowdown and some of the biggest tech companies have announced hiring freezes and job cuts. On November 2nd, 2022, Amazon decided to halt new incremental hires in their corporate workforce for the next few months in face of the “unusual macro-economic environment.” On November 7th, Lyft announced they planned to cut “13 percent of its employees” – nearly 700 of its 5,000 workers – as it anticipated a recession next year and rising “rideshare insurance costs.” Elon Musk, who recently acquired Twitter with a $44 billion deal on October 27, ordered job cuts across the company – from top executives, including the chief executive and chief financial officer, to divisions such as the engineering and machine learning units as well as the sales and advertising departments. No specific number was given, but the scale of layoffs was estimated to be roughly half of the social media platform’s workforce–approximately 3,700 employees. Meta also expects to begin large-scale layoffs as part of the company’s plan to cut expenses by at least 10% in the next few months.

The recent wave of tech sector layoffs has generated worry for the future of the world economy, which signal that a recession is looming. Many companies are seeing a decline in profits in recent quarters and expecting more downward trends, especially amid high inflation and rising interest rates. Notably, Meta’s profits in the most recent quarter were down more than 50% from last year, as the company struggles to restructure around its emerging immersive digital world of the “metaverse.” Google’s parent company, Alphabet Inc., also reported its fifth consecutive quarter of slowing sales growth, while it has also slowed hiring and required some employees to apply for new jobs. Snap, the maker of Snapchat, also suffered from slowed economic growth, and according to its third quarter report, the company experienced its slowest-ever rate of revenue growth. The slowdown is not limited to social media giants, and is being felt across the tech industry. For example, semiconductor companies are cutting manufacturing expenditures as sales of smartphones and appliances continue to decrease.

Amid the tech industry’s stagnation and persistently high inflation worldwide, economists and businesses have contradicting forecasts about the coming year. Many warn there is a high likelihood the U.S. economy is headed for a recession, but others have been more optimistic. Those who are more confident include JPMorgan’s Chief Financial Officer, who say they have not seen “a crack” in their financial health, and Delta Air Lines’ Chief Executive, who announced that the travel sector “is going to be very strong through the quarter and into the New Year.” Indeed, the October jobs report published by the U.S. Department of Labor seems to show that the labor market remains strong, despite unemployment rising to 3.7%.

While many other signals indicate a cooling economy and justify worries of a coming recession, the recent wave of layoffs from tech companies are not a major indicator of recession. The layoffs in the tech industry, though unprecedentedly large-scale and conspicuous, account for only a small part of the overall labor force. Employers across a variety of other industries, such as food services and entertainment, are actively hiring to restore their workforce from pandemic job cuts. Tech companies have seen huge growth in the past three years. Employees moved to remote work and students attended classes online, which drove up computer sales, cloud storage, and online shopping. But it is improbable they will maintain this growth as the Covid-19 pandemic begins to pose less of a public health crisis. Though tough days for the world economy are expected, the recent tech-layoffs could also be an unavoidable result of the tech industry cooling down from Covid-related expansion.

The #MeToo movement is often described as having sparked a “conversation.” Indeed, survivors have spoken, and collectively their voices have been heard. Although the response has certainly been substantial, the conversation is still in many ways one-sided. In a recent Bloomberg Law article, Proskauer Rose attorneys Sydney Cone, Kate Gold, Atoyia Harris, and Sehreen Ladak outline the #MeToo movement’s progress thus far—applauding its victories while highlighting the gaps that still pervade the conversation five years later. 

Since its viral outset in 2017, the #MeToo movement has set the foundation for several notable developments. In the corporate realm, for instance, an increasing number of employers have implemented mandatory sexual harassment prevention trainings and educational opportunities. These efforts focus on establishing stricter standards for conduct and compliance in the workplace. Moreover, the #MeToo response has resulted in new policy initiatives. President Biden’s Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 marked a pivotal point in this progression. The Act importantly defined sexual harassment claims as a category of law distinct from other workplace misconduct claims. Under the Act, sexual harassment claims would inherit a type of protective immunity because they would no longer be subject to arbitration and nondisclosure agreements. 

More recently, the Senate advanced another initiative, by passing the SPEAK Out Act in September. By making nondisclosure and non-disparagement clauses unenforceable in sexual harassment and sexual assault disputes nationwide, the Act was formed with the intention of empowering survivors and averting further harm in the workplace. 

While these emerging initiatives suggest a positive shift in the prevention of and protection against workplace sexual violence, the numbers say otherwise. Statistics collected by the Equal Employment Opportunity Commission (EEOC) demonstrate that instances of workplace sexual harassment have not followed this anticipated downward trend. In fact, the number of sexual harassment charges increased significantly in the years that immediately followed the viral expansion of the #MeToo movement in the Fall of 2017. Moreover, wide scale surveys indicate a growing disparity between the number of actual incidents and formally filed complaints. In a 2022 survey of women working in STEM, an alarming 62% of respondents noted incidents of sexual harassment at their places of employment. Only 29% of these individuals filed formal complaints. 

Pointing to these numbers is in no way an attempt to discredit the enormous gains that have stemmed from the #MeToo movement. Rather, they serve as a guide for ongoing conversations around the sexual harassment and assault in the workplace. In the majority of studies on workplace conduct, the prevalence of sexual harassment in professional spaces is attributed to power inequalities and the continuation of gender stereotypes. A 2020 Hollywood Commission survey on accountability found that only 35% of respondents felt that it was at least somewhat likely that an employee in a position of power or authority would be held accountable for sexually harassing an individual in a subordinate position. Interestingly, however, the frequency of harassment does not tend to decrease when the roles of power and gender are inverted. A 2020 study published by the American Academy of Arts & Sciences revealed that instances of sexual harassment actually multiply when women dominate spaces of authority and leadership. The authors of the study attributed this correlation to an evolving conscious or subconscious desire for “status equalization” as more women occupy positions of power. 

Without undermining the fact that women—and particularly women of color—are disproportionately impacted by sexual harassment and violence in the workplace, it is also important to note that people of all gender identities are affected. Across data samples, men constitute a much smaller percentage of overall reported cases of sexual harassment and violence. However, this is not an entirely accurate representation. According to a 2018 Marketplace-Edison Research Poll, nearly one in seven men have endured workplace sexual harassment, demonstrating that men are less likely than women to speak out. Again, the conversation turns to gender norms and stigmas, but the solution is not straightforward. 

The frequency of incidents of sexual harassment creates a common human experience of normalized violence. Goss Graves, the National Women’s Law Center director, explains that “our goal has to be ending sexual violence . . . The real goal feels giant, and not achievable overnight.” Legislative and corporate policy changes alone cannot achieve complete systemic reform. Recent policy initiatives are tremendous for survivors, but they are fragments of the wider conversation. The response survivors seek is expansive and multifarious, yet it shares a common root: education. Tarana Burke, founder of the #MeToo movement, explains that children must be taught “to reject rape culture and respect bodily autonomy.” Educating young people about consent and holding upcoming generations to a higher standard is integral to reshaping norms and expectations for conduct within academic, professional, and social settings. #MeToo amplified the conversation, and now we must continue to ignite the response.

As an impact of the pandemic and Russia’s invasion of Ukraine, the US economy is predicted to face a recession that may result in massive layoffs in 2023. In June, thousands of Tesla’s employees were laid off based on Tesla’s “super-bad feeling” about the economy. In August, Apple laid off roughly 100 contractors as part of a push to limit their spending. In September, Meta announced plans to freeze hiring and restructure current teams to cut down expenses and develop a streamlined internal workforce. Finally, HelloFresh laid off 600 employees, recorded as the biggest layoffs this year. 

The National Bureau of Economic Research (NBER) stated that the US is not yet officially in a recession. However, experts are concerned that recent layoffs among tech giants will impact the labor reports in the second half of 2022. According to the US Bureau of Labor Statistics, the unemployment rate rose 0.2% to 3.7% in August, and the number of unemployed people increased to six million. Labor reports are one of the most indicative factors in predicting US economic recessions. If people are not earning money, their purchasing power declines, and companies’ profits will decrease. Consequently, this dynamic also decreases investor confidence in companies. As a result companies layoff more employees to streamline business operations and adjust to lower consumer demand. 

As a result of employment trends, social media users are documenting their layoffs on TikTok, with the hashtag “layoffs,” garnering more than 30 million views. These users are encouraging young workers to distrust their future employers. Instead of viewing layoffs as a source of disgrace, the mindset of many laid off workers is that the company is responsible. Human resources departments are tasked with the legal and moral responsibilities of hiring, compensating, training, developing, monitoring, retiring, coaching or counseling, and selecting the right positions and/or laying off employees when the organization has to reduce its workforce. Therefore, it is important for the human resources department to apply a humanist approach when firing employees.

Because mass layoffs may continue into next year, companies must consider today’s employment law. Companies may face potential employment discrimination suits if termination is not supported by solid and transparent evidence demonstrating the financial reasoning behind layoffs. Lawsuit settlements or hiring legal counsel to develop defenses is extremely costly and time-consuming. When faced with a looming recession, employers should be aware of employment laws when conducting workforce reductions. They must consider notice of termination required by federal law and wage payment obligations under wage and hour laws. This will ensure employers are in compliance with applicable discrimination laws and that they can avoid incurring additional problems, beyond recession related profit losses.

Elon Musk’s all-male clique, the “Paypal Mafia,” epitomize the problem of Bro Culture in Tech. This close-knit circle of PayPal alumni founded or invested big in lucrative companies such as Tesla, Airbnb, Youtube, Uber, Pinterest, and LinkedIn. They invest in each other’s ventures and dictate which start-ups will receive their support and which will not. Basically, they gatekeep. But who do they close the gates to?

Mafia member Max Levchin answered this question in an interview with Fortune in which he attributed PayPal’s success to “self-selecting for people just like you.” In other words, they seek to exclusively hire those who fit into their “clique” – and by virtue of this their image of a ‘bro.’ This image skews straight, cisgender, and male.

Levchin elaborated on his dream employee: “He thinks like me, he’s just as geeky, and he doesn’t get laid very often. Great hire! We’ll get along perfectly.” Levchin admitted that the work culture he promulgates, in which disagreements sometimes lead to wrestling matches, excludes women and other minority groups. But he asserted that hiring employees of similar backgrounds and dispositions increases productivity, which is essential for startups’ success. Therein lies the problematic, bro-culture ethos that defines the PayPal Mafia: not only is diversity not worth pursuing; it is antithetical to success.

For a case in point, in the 646 companies PayPal mafia members invested in from 1995 to 2018, only eighty-nine (48%) had at least one female founder, and only one had a founder who identified as nonbinary. As the de facto golden boys of Silicon Valley, the PayPal Mafia inspires other power players to gatekeep in the same way, e.g., in the first quarter of 2022, women-founded teams received just 2 percent of venture capital funding. 

Because industry paragons like the PayPal Mafia primarily value bros’ perspectives, so do the directors, executives, and managers under them, who often ignore and denigrate employees who do not fit the ‘bro’-mold (“non-bros”). Junior male employees emulate this problematic behavior to advance, resulting in workplaces replete with harassment and discrimination. Riot Games, Activision Blizzard, Alphabet, Pinterest, Rivian, Uber, and SpaceX, among others, have all faced multiple gender discrimination suits alleging a toxic “Bro Culture.” Loretta Lee, who worked at Google from 2008 to 2016, alleged that she faced lewd comments, pranks, and even physical violence from her male colleagues daily. Employees who speak out against their companies’ Bro Culture often face retribution. After she complained, Lee’s male colleagues stopped approving her work, creating the illusion of false performance for which Google eventually terminated her. 

Bro Culture harms businesses by making them more difficult and less attractive places for non-bros to work at. This carries tangible financial consequences, e.g. Alphabet paid $310 million and Riot Games, $100 million, to settle sexual harassment and gender discrimination suits. Despite Max Levchin’s claims to the contrary, Bro Culture hinders productivity. Employees at Blue Origin attributed widespread project delays and budget overruns to a toxic work environment fueled by Bro Culture. Female employees struggled to be productive in the face of constant harassment and discrimination. In the highly collaborative schema of the tech world, hindering the work of some hinders the work of all. In the Google example, Lee’s male colleague’s retaliatory refusal to approve her work on a project delayed the entire project. As the highly skilled workforce that drives Tech grows increasingly diverse, employees will grow less tolerant of Bro Culture, and companies that only value bros will miss out on important pools of talent. 

For the sake of decency and financial sense, the technology industry must seek to eliminate Bro Culture from the top down. Industry leaders must fund more female- and minority-founded companies and support DEI initiatives in the businesses in which they invest, including a guarantee of equal pay regardless of gender. To eliminate harassment and discrimination, tech companies must empower Human Resources. HR should have regular check-ins with employees in which they can speak openly without fearing retaliation. Hiring committees must make a concerted effort to hire more minorities, women, and people who respect them. Onboarding committees must impress upon new hires the importance to the company culture of valuing everyone’s perspective. None of these steps will be easy, but if the technology industry truly strives to build a brighter future full of AI, self-driving cars, and commercial spaceflight, it must abandon the oppressive beliefs of the past. 

Corporate social responsibility, or the idea that corporations should consider the needs of the community as much as the needs of their shareholders, is nothing new. In the famous case of Dodge v. Ford Motor Co., Henry Ford declared the purpose of Ford was to benefit others including his community, his customers, and his employees. Any benefit to his shareholders was meant to be incidental. Ford would go on to lose that case, setting the precedent for years to come that shareholders take precedence in the long list of corporate stakeholders.

Many corporations today advance far-reaching and progressive social causes. For instance, some financial firms such as JP Morgan and Bank of America have put their money behind clean, renewable resources in an effort to decrease our reliance on fossil fuels.

Some firms, including a startup known as GloriFi. have decided to take the opposite approach. GloriFi was founded by Toby Neugebauer and Nick Ayers, with funding from Ken Griffin and Peter Thiel. GloriFi is a mission-driven financial technology company which specializes in banking, credit cards, mortgages, and insurance. The founders had one objective in mind: to be a force for American conservatism on Wall Street. GloriFi has financially supported causes including bolstering police forces, capitalism, gun rights, and traditional family values. At the Summer Conservative Political Action Coalition event in 2022, Neugebauer furiously rallied at what he viewed to be Wall Street’s ubiquitous liberalism. Metaphorically shaking his fist, Neugebauer declared that it was time to “deliver better products than the people who hate us.”

Within months, GloriFi was on the verge of bankruptcy, and its investors had nearly lost all their investments. The firm had launched products that became commercial failures, including an inoperable credit card with material incompatible with payment terminals. The firm consistently missed deadlines, laid off several employees, and failed to deliver on its promise to provide quality service emphasizing traditional values.

Before long, Neugebauer was facing demands from investors to resign. Neugebauer responded by blaming vendors, surrounding himself with yes-men and sycophants, and growing increasingly paranoid and distrusting towards his business partners. GloriFi’s failure cannot be explained purely by the firm’s founders’ ideologies, which put them at a deficit in an increasingly progressive Wall Street. GloriFi refused to understand that company profits are more important to shareholders than ideological spending, corporate responsibility, and effective Environmental Social Governance (ESG).

While corporations continue to maintain their own corporate social responsibility goals, this is secondary to the aim of increasing company value. Demonstrated by A.P. Smith Manufacturing, a fire hydrant manufacturing company, who argued before the New Jersey Supreme Court that their company benefitted from investment into their community. By funding universities and higher education, the company ensured its community would continue to produce skilled consumers and workers for the future.

If GloriFi expects to succeed, its management should reevaluate how they plan to increase company value. Management should follow shareholder advice and focus less on paying homage to “conservative values.” Glorfi must consider how their community investments contribute to the value of their company. Social responsibility is more than just personal politics and private vendettas, it means a greater effort to ensure the survival of the company through social investment and understanding.

Federal benchmark rates continued to rise after the Federal Reserve approved its third-consecutive increase this year by adding 75 basis points while projecting another increase. They expect the rate will increase until reaching 4 to 4.5 percent by the end of this year, a level we have not seen since 2008. This increase comes as expected in the battle against soaring inflation rates, which is at 8.2 percent annually, near its highest rate in 40 years. This increase was followed by negative responses on the stock market. The Dow Jones Industrial Average (DJIA) sunk 19.38 percent while the S&P 500 suffered a 23.64 percent decline on a year-to-date basis, falling to the level that people call a “bearish market.” The future economic forecast is even more gloomy. While the first two quarters of 2022 saw negative growth, experts claim that the third quarter’s Gross Domestic Product (GDP) is also close to zero. Consequently, the rise of interest rates will affect the economic recovery after it was hit by the last recession during the pandemic. Households, particularly low-income families and workers, will be the first to be affected as the hike in interest expenses will increase prices for products and services while they face the danger of unemployment. The United States will, once again, face the threat of recession.

While there is no standard for defining a recession, most experts refer to a recession as a significant decline in GDP for two consecutive quarters. The National Bureau of Economic Research (NBER) offers a broader definition of recession by taking into account several factors, such as the decline in GDP, the decline in real income, the rise of unemployment, the slowed production and sales of the industrial sector, and the lack of consumer spending. Many of these factors affect each other, meaning the decline in GDP will likely constrain consumer spending, which affects the production of products, and in turn, gives rise to the unemployment rate. According to NBER, a recession happens for months, while the average recession lasts for 21.6 months. The most recent recession in the United States is the Covid-19 recession, which lasted around two months.

Rising inflation rates is one of the common causes of a recession. When inflation is high, the price of goods and services increases and hampers people’s ability to purchase. Because the value of money is diminished, people tend to spend more of their money on everyday goods rather than save it. Consequently, people will ask for a wage increase, and in turn, the company will increase the product’s price again to make up for the labor cost. Then the cycle repeats itself. If this pattern continues for a more extended period, low-income families are the ones who suffer the most because they will not be able to afford the price increase, and their savings will not be enough to cover their expenses.

In order to control the inflation rate to a moderate level, the Federal Reserve resorts to its most helpful method: increasing the federal benchmark rates. Higher interest rates will slow down the inflation rate by tightening monetary policy. Simply put, the Federal Reserve increases the short-term interest rate, which makes money harder to borrow. Business owners will reduce the production of goods and services because of the rise of operational and interest expenses. On the other hand, consumers will be forced to tighten their belts and discourage consumption, driving down demand. Moreover, people will be eager to save money because the bank rate is higher. This pattern will continue until the supply and demand reach equilibrium and create price stability.

Increasing the federal benchmark rate is not risk-free, as it will bring other problems to the table. Jerome Powell, Chairman of the Federal Reserve, said, “While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses.” Low-income families are the ones who suffer the most as they will experience lower quality lives. First, as the interest rate rises, the companies will increase the price of goods and services to make up for their higher interest expenses. The Federal Reserve estimates that prices of goods and services will continue to grow at a level of more than three times the two percent target.. As a result, the low-income families probably will not be able to afford the usual standard of living because everything from gas, water & electricity bills, food, and groceries become more expensive. Moreover, while the increased interest rate encourages people to save money in the bank because of higher investment returns, low-income families might be unable to benefit from this as their savings barely cover their expenses.

Furthermore, the rise of interest rates also affects their repayment loans, such as mortgages and automobile leases. Their installments will increase as the interest rate increases, especially on a floating-rate lease. Accordingly, the rental lease will also become more expensive because landlords tend to pass the increased mortgage rent to their lessee. Finally, the increased rate also has a negative impact on the job market. In a worst-case scenario, the Federal Reserve projects an increase in the unemployment rate to 4.4 percent next year. That would mean the loss of 1.2 million jobs. The combination of increased interest rates and lower demand will diminish companies’ revenue and production, and in return, they will restrict their hiring rate. At some point, some companies might not be able to compensate their workers due to a lack of cash flow. Thus, mass layoffs will probably occur as companies attempt to cut labor costs. Consequently, many low-level employees will be on the verge of unemployment because their positions are the first on the list when companies plan to lower production and are easy to replace when the economic situation goes back to normal.

By Ristyo Pradana

Legislators all around the world are looking at fast fashion industries with greater scrutiny. In March 2022, the European Union published the Ecodesign for Sustainable Products Regulation (ESPR) to improve product circularity and identify substances that may prevent products from being recycled. 

ESPR specifically set single-fiber, or monofiber, clothes as the new standard, which makes clothes easier to recycle. Across the Atlantic in America,  the Fashioning Accountability and Building Real Institutional Change Act—known as the FABRIC Act—is the first federal fashion bill which aims to improve the labor rights of garment workers and encourage reshoring of the American garment manufacturing industry. More regulations on the fast fashion industry are also appearing at the state level. California recently passed a bill that requires hourly wages for garment workers. Under this new bill, workers would no longer be paid per garment, and manufacturers and brands would be penalized for illegal pay practices. 

Growing government regulations may be a response to the inability of fashion industries to self-regulate, despite their stated intentions. While in recent years, many fashion brands began sustainability marketing, much of the efforts remain acts of greenwashing that yield little concrete benefits to the environment or garment workers. The Netherlands’ Authority for Consumer Markets notably investigated H&M and Decathlon for greenwashing and misleading marketing claims. This is just one example, out of many, that led to the introduction of these new fast fashion regulations across America and the Western Europe which have begun to hold fashion brands legally accountable for their production and marketing not only domestically but also abroad in their offshoring factories. This series of new rules shifts the burden away from the so-called responsible and socially aware consumers and has begun to tackle fashion corporations.

In addition to its impact on fast fashion brands, new regulations will also affect the international supply chain of fast fashion. Specifically, as ESPR covers all clothes sold in the bloc which imports nearly three-quarters of its textiles, any fashion multinationals export to the EU would be impacted. We should expect the trickle-down effect of EU and American policies to hit fast fashion suppliers in developing nations. With the new regulations, one may envision a mutually beneficial scenario. Fast fashion brands may reshuffle their supply chains and possibly identify and transform local providers in Southeast Asia to comply with the EU standards. Economically resourceful fashion brands may in turn proactively provide infrastructure, training, and protection for offshore garment workers. 

Nonetheless, this possibly auspicious situation gives rise to many more concerns, among which who would bear the cost of more expensive products. It is predictable that sourcing sustainable and recyclable materials and ensuring workers’ rights would increase the cost of production. This rise in cost is at least a short-term problem before sufficient innovation can ensure cheaper and widely available recycling methods, thus creating a more efficient and closed ecosystem for clothing production. We are indeed hopeful that more and more startups have come up with solutions for effectively recycling clothes. France-based Carbios SA developed technology to recycle the polyester in clothes blended with synthetic and organic materials. It signed an agreement with sportswear brands earlier this year, including Puma SE and Patagonia. 

Holding fast fashion brands legally responsible for their impact on the environment and workers’ rights may also reshape the landscape of the fashion industry and induce interesting consumer behavior. The heightened labor and recycling standard in the new EU regulation would increase the retail prices of fast fashion items, at least in the short term. The single-fiber requirement would also pose challenges to many fast fashion designs, which rely heavily on mixed fiber fabrics. The major appeal of fast fashion—cheap pricing—would be mitigated. Consumers may gradually decide to purchase less or prioritize second-hand clothes shopping. It may also be likely that fast fashioning pricing would begin to approximate that of local and small business. As a result, consumers would place greater emphasis on the design, quality, or convenience of their purchases. Granted, fast fashion brands may have the upper hand in marketing and advertising. However, with lessened price competition, small and local businesses may finally have the ability to compete with fast fashion brands through the creation of a loyal consumer base.  

The Uffizi Galleries in Florence, Italy, are suing French fashion label Jean Paul Gaultier for “unauthorized use” of imagery from The Birth of Venus, a 15th-century painting by the famous early renaissance artist Sandro Boticelli. “Le Musée,” the capsule collection at the center of the lawsuit, was intended to be Jean Paul Gaultier’s tribute to the art world. 

Art and fashion have always been intimately intertwined worlds of creative expression, one often borrowing inspiration and ideas from the other. The earliest known “collaboration” was between Spanish surrealist artist Salvador Dali and Italian couturier Elsa Schiaparelli. 

In 1938, Schiaparelli used a print specially designed by her friend Dali to produce the iconic. While the terms of this collaboration were mutually agreed upon, it would have been an unrealistic proposition if one of the parties had died many years before. This was the case for Yves Saint Laurent who, for his autumn-winter collection in 1965, launched the iconic “Mondrian” dress, for which he candidly and publicly drew inspiration from a painting by the then deceased Dutch painter and famous pioneer of modern art, Piet Mondrian. The modernist style of Saint Laurent’s dress revolutionized high fashion, with its short length, minimalistic silhouette, and unique pattern. It is unknown whether the designer asked Mondrian’s estate for permission, but if the dress was available today, authorized use would likely be immediately raised by Saint Laurent’s legal team. 

The lawyers at Jean Paul Gaultier’s atelier failed to consider the “authorized use” question before the very public and costly release of a full collection featuring Botticelli’s masterpiece, not only on items of clothing but also widely circulated publicity materials. The Uffizi claimed that it sent Jean Paul Gaultier a letter of formal notice in April requesting that the brand remove these items of clothing from the market, or respond with plans to make a commercial agreement that would “remedy the abuse committed.” The museum claims that it was forced to take legal action after the letter was ignored. The fashion house could argue that the Boticelli image was painted during the 1480s, which places it in the public domain, making it free from copyright protections. However, the Uffizi’s claim finds support in Italy’s Codice dei beni culturali e del paesaggio, the Italian Code of Cultural Heritage of 2004. The code, which is entirely independent of copyright law, intends to protect “objects with a ‘cultural interest,’” i.e., those with “artistic, historical, archaeological and ethno-anthropological interest.” The code takes precedence over copyright law and remains in force even when a painting with the vintage of Botticelli’s Birth of Venus has fallen into the public domain. 

Damages will be a contentious issue in future stages of this lawsuit. How much will Jean Paul Gaultier have to pay for the alleged unfair use and its lack of response to notice from Uffizi? According to Ella Schmidt, director of the Uffizi Galleries, fees can range anywhere between a few thousand to tens of thousands of euros, depending also on how many garments the image appears on. Gaultier’s use of the image on an entire collection of clothes might set the company back by more than €100,000. 

This lawsuit raises many interesting questions about the cost of “inspiration” in the fashion industry. It also highlights the increasingly strict policies museums and artists’ estates are adopting vis-a-vis licensing, fair use and compensation. A couple of years ago, the Wall Street Journal explored the ethics of fashion’s voracious, somewhat crass, and profit-driven attempts at (over)licensing famous works by deceased artists. This raises a policy question about what limits the law should set to balance the protection of cultural heritage and the rights of individuals and companies to profit from authorized works deriving from creative freedom and inspiration.

Art and fashion collaborations quickly achieve the status of high fashion from the day they drop and continue to enjoy their high worth as rare vintage items on resale websites throughout their lifetime. Takashi Murakami x Louis Vuitton, Coach x Jean-Michel Basquiat and Raf Simons x Robert Mapplethorpe are just some examples of successful ventures. Some fashion “collaborations,” however, have not gone down well in the public eye. Marc Jacobs, for example, was sued by Nirvana in 2019 for using images resembling the grunge band’s classic black-and-yellow iconography in its Redux Grunge collection. Roberto Cavalli faced similar allegations from street artists in San Francisco’s Mission District for using designs of their murals without permission. The latest to join the list of accused infringers is the Chinese clothing company Shein, which already suffers from a murky reputation and allegations of questionable ethical practices. British oil painter Vanessa Bowman accused the multi-billion dollar enterprise of unauthorized use of her images on their product, but thus far hesitates to get involved in time-intensive and expensive litigation. 

Allegations of infringement are not good for any fashion brand and a nuisance for artists. The increasing number of cases in this area indicates a mismatched sense of “fair use” on both sides and the need for frontloading collaborations with more robust transactional terms and safeguards.  Collaborations that achieve the highest levels of commercial success and cultural acceptance seem to be collaborations in the true sense: based on mutually agreed upon terms, clear communication about image use and predetermined models of profit-sharing. If the designer in question is knowingly using imagery from another artist’s work, the best recourse to avoid costly litigation and potential payment of damages would be to communicate with the artist themselves (or their estate, in case of a decedent), acquire relevant permissions and, ideally, draw up an arrangement for mutually benefitting from sales. 

Patagonia Inc. founder and avid climber Yvon Chouinard’s autobiography, Let My People Go Surfing, provides important insights into his background and recent decision to sell his company. In 1970, he lamented the damage caused to his beloved Yosemite by fellow climbers hammering pitons into the rock. For Chouinard, this issue was personal because his company was selling the pitons. Unable to stomach the environmental degradation, he transitioned from selling invasive pitons to smaller chocks that did not require hammering. He advertised the use of these chocks as “clean climbing.” They became a smashing success.

By the 1990s, Chouinard was struggling to reconcile being “in business to save the world” with profiting off the resource-intensive clothing industry. A hired consultant challenged Chouinard’s commitment to philanthropy, “I think that’s bullshit…if you’re really serious about giving money away, you’d sell the company.” Chouinard balked at the idea. He worried that new management would do away with his initiatives to use costly organic cotton and donate one percent of yearly revenue to environmental causes. Chouinard continued his activism for decades, all the while worrying that “it wasn’t enough.” 

In 2022, Chouinard found a solution. He transferred Patagonia’s voting shares to the Patagonia Purpose Trust and its non-voting shares to a 501(c)(4) called the Holdfast Collective. The trust, which will hold two percent of Patagonia’s total shares, will have sole authority to appoint members of the board and structure the company charter. This will allow Chouinard to keep control in the hands of family and trusted advisers who will uphold the company’s mission statement: “We’re in business to save our home planet.” The Holdfast Collective will receive the company’s yearly profits as a dividend, all of which will go to environmental causes. Chouinard  structured the Holdfast Collective as a 501(c)(4) so it can make political contributions. Because of this choice, he received no tax benefits for giving away his multi-billion dollar company. More than fifty years after building a company on the ethos of clean climbing, some hope that Chouinard just laid the foundation for an era of clean capitalism. 

Chouinard’s innovation is one of the bolder examples of stakeholder capitalism. This idea that businesses should pursue goals other than profits for shareholders recently gained support from the Business Roundtable, a yearly gathering of prominent CEOs. For decades the meeting promulgated the idea that corporations exist to serve their shareholders. However, in 2019, the CEOs issued a statement that corporations must start placing the interests of the environment, workers, and communities on equal footing with the quarterly earnings report. 

Reasonable minds differ as to the viability of stakeholder capitalism. In 1970, Milton Friedman published an article decrying the intrusion of social responsibility into boardrooms. He believed a corporation’s only responsibility is to “increase its profits so long as it stays within the rules.”  Vivek Ramswany, a healthcare entrepreneur and prominent critic of stakeholder capitalism, echoes Friedman’s concerns. Ramswany further argues that corporations entering the political sphere will give corporate executives the power to decide our social values, eventually causing “rampant and…irresolvable cultural discord.”

For now, Patagonia is popular on both sides of the aisle, despite its long history of political activism. But, some evidence supports Ramswany’s fears. Ron DeSantis, the governor of Florida, has been vocal in his opposition to socially responsible companies. After Disney criticized a controversial Florida education bill, DeSantis pulled their tax exemptions and lambasted them in the press. Conservative state treasurers are also entering the fray. The treasurers of Arkansas and Louisiana pulled over half a billion dollars from BlackRock, an investment manager, due to the firm’s commitment to environmental causes. It remains to be seen if Patagonia’s restructuring will result in a similar backlash.

Friedman saw stakeholder capitalism as an effort by citizens to “obtain through undemocratic procedures what they cannot attain by democratic procedures.” He is right, but this is not the searing indictment he believes it to be. The filibuster effectively makes the United States the only member of the OECD (a club of advanced economies) that requires a supermajority to pass simple legislation. With the public sector perpetually gridlocked, it is unsurprising that citizens look to the private sector to combat the seemingly inexorable march of climate change. Chouinard’s restructuring of Patagonia constitutes a welcome act of unfathomable generosity and a noteworthy innovation in corporate governance. Patagonia’s ability to continue thriving under this new structure will be a bellwether for those who wish to change the nature of corporate boardrooms. Friedman and Ramswany may yet be right that the private sector is fundamentally unsuited to solve our social ills. But, when confronted with warming oceans and a limp legislature, what else was Chouniard to do?