The Inbox – Orwell’s Big Brother Has An App For That

| Zuckerman Spaeder Team

Big Brother is watching you, or at least tracking your movements through your smartphone. According to the Washington Post, employers have steadily increased their use of GPS-enabled technology to track the movements and location of “field employees” like salespeople and delivery drivers. In fact, a 2012 study by the Aberdeen Group cited an increase of over 30% in the tracking of employees over the previous 5 years. Legitimate reasons exist to track field employees, such as making sure that drivers take the best routes and sales calls are conducted efficiently. But it’s more tricky to justify the tracking of employees who are off the clock.  For example, Myrna Arias, a former sales executive with Intermex, was allegedly fired for disabling a tracking app called Xora StreetSmart when she was off duty. Now Ms. Arias has sued the company, alleging wrongful termination and invasion of privacy. Jay Stanley, a senior policy analyst at the ACLU, cautions employers against collecting off-the-clock data, because it opens the door to discriminatory practices. Mr. Stanley wondered, "What happens if an employer doesn't like the choices a worker makes in their personal lives and retaliates professionally?" 

We discussed emerging trends in the c-suite recently, and found that companies are increasingly tying executive compensation to performance. For those that do not, we can imagine a corporate shareholder version of peasants storming the castle with pitchforks in hand, thanks to say-on-pay voting. In the case of JP Morgan CEO Jamie Dimon’s 2014 compensation, the shareholders’ rebellion led to a relatively low approval rate for Dimon’s and other executives’ compensation. According to USA Today, 61.4% of shareholders approved the payouts, which starkly contrasts with an average 90% approval rating for companies that seek shareholder input on salary and bonus plans. Advisory firm ISS encouraged shareholders to rebuke the plan when they learned of Dimon’s $7.4 million cash bonus. ISS advised that “[t]he reintroduction of a large discretionary cash bonus in the CEO’s pay mix, without a compelling rationale, has substantially weakened the performance-basis of his pay.” If corporate leadership can provide a strong rationale for a big bonus, it’s more likely that the shareholders will drop their pitchforks and fall in line. 

An interesting collaborative working paper from Mississippi State University, Drexel University and Northern Illinois University has unearthed a link between a boss’s bad deeds and his company’s market performance. According to the Wall Street Journal, the paper found that a corporate leader’s corrupted behavior can result in a 1.6% loss of shareholder value, or $110 million. Adam Yore, one of the authors, cites a decline in shareholder trust for the decline in market cap. Furthermore, the declines in value can persist. “The firms with the misbehaving executives saw a decline in value of 10% to 11% during the year in which the transgression was announced.”  This, in addition to new “contracts and controls” that may be enacted to mitigate the trust issues, can ultimately create inefficiencies that hurt the balance sheet. All that said, the report stated that these “horrible bosses” tend to stay in their positions despite the financial impact. Board members have a tendency to overlook indiscretions and focus on performance. Except, of course, the American Apparel board, which used sexual harassment allegations as a basis to terminate the company’s founder, Dov Charney.

Back in March, we discussed Apple’s placement on both sides of the poaching debate.  On one hand, Apple found itself scrutinized for entering into anti-poaching agreements with industry competitors, while at the same time being accused of aggressively poaching the employees of lithium-ion battery maker A123 Systems. A123 Systems sued Apple in Massachusetts federal court, alleging that Apple poached its engineers as part of its purported grander design of using the battery technology to engineer its own electric vehicle. According to Reuters, A123 and Apple have reached an as-of-yet-undisclosed settlement that will end the dispute.

Information provided on InsightZS should not be considered legal advice and expressed views are those of the authors alone. Readers should seek specific legal guidance before acting in any particular circumstance.

As the regulatory and business environments in which our clients operate grow increasingly complex, we identify and offer perspectives on significant legal developments affecting businesses, organizations, and individuals. Each post aims to address timely issues and trends by evaluating impactful decisions, sharing observations of key enforcement changes, or distilling best practices drawn from experience. InsightZS also features personal interest pieces about the impact of our legal work in our communities and about associate life at Zuckerman Spaeder.

Information provided on InsightZS should not be considered legal advice and expressed views are those of the authors alone. Readers should seek specific legal guidance before acting in any particular circumstance.