Mandate for Directors/Navigating the Global Economy

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This post addresses remarks by Admiral Jim Stravidis to the New England Chapter of National Association of Corporate Directors.  My prior post outlined the Admiral’s understanding of the world order today and its immediate geopolitical prospects.  He emphasized that directors must have a deep understanding of the world order in setting policy for American companies.  It is up to the board to deep dive into strategic planning; management is so busy with the day-to-day running of an enterprise that it is the board that should undertake the background thinking, bringing that to board meetings where it can be evaluated by management.

Hand in hand with the board’s need to have deep understanding of the world order is the necessity for the Board to maintain high levels of personal information about world business markets.  In this regard he offered a reading list of two books and two publications: The Thinking Machine by Jensen Huang (CEO of Invidia); 1929 by Andrew Ross Sorkin (a sobering read); weekly read of the magazine The Economist; current business news through the Financial Times.

Doubling down on the emphasis on having robust current information to set policy, he suggested consideration of retaining a consulting firm for further support.

Board thinking should include a “Plan B” if the primary plan does not work as anticipated. Look to history for guidance.

What are the major business areas of opportunities today?  Here his advice centered on major enterprises.  But if you are not a director of an enterprise of such substance as to be in the market directly to participate, what if any is your strategic opportunity to support these opportunities?

The nine areas of major opportunity today:

  1. Engage with China.  Fight the reticence.
  2. Work to “rewire” business with the oil powers: Iran, Venezuela, Russia.   (I note his supposition that oil will remain a very major commodity; never in an hour and half did he mention/tout renewables/global warming factors.)
  3. Rebuilding Ukraine (major business opportunity; historical analogy was rebuild of South Korea; no mention of Gaza btw).
  4. India–crucial.
  5. Brazil: not as big as India, but big.
  6. AI (no surprise here).
  7. Defense spending. Trump in the US, NATO countries in Europe, Japan doubling military budget, India.
  8. Quantum Computing (details unclear but in five years will be “huge”)
  9. Cyber Security (this is a policy matter for board, not to be left to the techies)

Of these, the one most surprising to me was reference to quantum computing and I am intending to attend the March 3 upcoming online program put on by NACD-New England (which sponsored the Stavridis program herein discussed), entitled “Quantum Computing: Staying Ahead of the Technology Curve.”  Search for NACD-New England on line to sign up.  (Note: I am former board member and current advisory board member of this NACD chapter.)

Global Power and Global Markets

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This and the next-following post will report highlights from an hour-and-a-half presentation by Admiral Jim Stavridis, who tackled the definition of the current balance of world power and the impact of that balance on current and future global markets.  Lest you sense this will be a superficial meander, let me list the speaker’s background: four star admiral, principal aide to Rumsfeld, head of NATO, Chair of the Rockefeller Foundation, dean of Fletcher School of Law and Diplomacy,  presently is a sitting public company, director and Vice Chair of Carlyle Group (an investment fund with diversified ownership of tech and non-tech businesses).  Anyone can be wrong about anything, but he surely has the background to command our attention.   

The USA: The largest US trading partner by far is the European Union.  US relations to day are under some strain due to tariffs (see my prior recent post), Greenland, and cost of supporting NATO.  Greenland seizure has some strategic logic but it  has been owned by Denmark for 700 years, so likely that “crisis” will pass as Europe has “stood up.”  Tariffs seem destinated to settle at 15% for EU, both ways.  EU and US positions on Ukraine at this moment seem to be coming together in a joint proposal.

The Pacific: Arena is full of democracies which is good:  Japan, South Korea, Taiwan, Singapore, Philippines, Australia, New Zealand.  Tariffs stress but not “serious.”  Allies to US are bonded by risk / hedge against China.

China: Important to US by reason of supply chain and as a purchasing client.  Trump currently planning to visit China (and Xi to US).  Do not panic today. Will China invade Taiwan, a perceived risk.  Not likely in next 5-10 years and after that we shall see.  Unless Taiwan announces it is independent!  Chinese military is large enough but not easy to invade over water and Taiwanese topography difficult.  Chinese nilitary is untested, not having fought since 1949 in any significant way.  Forces are not broadly deployed; they lack seasoned generals; capturing the chips  industry may well not be viable reason to invade as  chip suppliers are diversifying around the world; the world having come to defense of Ukraine is an object lesson, as are sanctions thereby triggered against Russia commercially.  And after a few years the landscape may change anyway.

“Global South”: He includes Africa, South America: commercial importance coming for Brazil, Nigeria, particularly India.  This diverse area is coming into its own.  Big changes in production, markets.  Brings half the world’s population on-line which increases gross human capital which is always a plus (more brains at work): area holds 3.5 Billion people.  India is a key element; just announced was a tariff deal with the US in the 15%-18% range if India eschews Russian Oil.  He also sees India in favorable light as a “democracy”–no mention of past Modi issues.

“Russia”: Evil dictatorship, bringer of death, killer of political opponents and journalists.  Trump is beginning to recognize this.  Invasion of Ukraine united Europe, drove northern Europe into NATO, drove all Europe to boost military spending.  (Fascinating note on military spending: US budget even before Trump’s recent announcement at a vast proposed increase is $900B; Russian $150B; China $250B; EU at $500B is larger than China and Russia combined.)

Iran: Iran in next few years will change regimes, rejoin the world.

Venezuela: Note speaker also was once head of US Southern Defense forces.  With Maduro gone and the acting president showing promise, this may prove not to be a problem  He trusts Rubio and thinks he can handle this (and Cuba).  And US military action would not be a big deal, will not upset world economy or order.  Everyone in South America understands that the US may invade and it has not mattered to the world.  In the past 150 years the US has sent armed forces into South and Central American countries 56 times.  Still could go sideways but if oil companies over the next 3-5 years step in, assume risk (most not there how), assist country economy, things will be further helped.

Overall, the US still has substantial viable alliances around the world and “the system is holding.” It is vital for US foreign policy and thus for US business to understand the current and evolving world situation.    The next post will discuss how boards of directors, informed by the foregoing, should act in connection with setting corporate policy.

 

 

Tariffs for All

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Tariffs are in the news for obvious reasons, and below presents a brief overview.

On Inauguration Day the President issued his America First general trade policy statement.  On February 21 he issued his Memorandum of an American First Investment Policy. Tariffs arise under these policies and under various specific laws, are impacted by trade deals and agreements, and import and export controls.

[Separately but reflecting the same “America First” bias, certain increased restrictions now exist on inbound investment under the so-called CFIUS regimen and outbound limitations under the COINS Act and the BIOSECURE Act.  A full summary would far exceed the scope of this post, but may be addressed in another post in the future.]

Tariffs set on Chinese imports, at this moment set at 10%, have been as high as 20% for much of 2025; special tariffs for Canada (now at 35% except for energy and potash) and Mexico (presently 25% except for potash) are somewhat mitigated by the US Mexico Canada Act for certain compliant products.  (Note also that the President, speaking January 14, 2026 at a Ford plant, asserted that the USMCA was “irrelevant” to the United States.)

Another class of tariffs aimed at tariff reciprocity with certain other countries, were addressed in Executive Order 14527 issued April 2, 2025, and rates thereunder were adjusted by Executive Order 14326, July 31, 2025, from 10% to 41%.

Across the board, exemptions from all tariffs for low value imports have been eliminated: for China in May of 2025, for all other countries in August of last year.

Although subject to ongoing challenge, under the general tariff laws some countries have been targeted with specific tariffs on select goods (Brazil at 40% for most goods; India at 25%).

At present there are special tariffs as high as 50% on imports of steel and aluminum (with specific impact on auto imports), copper, timber, semiconductors and some materials; current investigations are ongoing as to pharma, aircraft, silicone, unmanned aircraft, wind turbines, certain robotics and medical equipment.  Further, there are pending programs looking to higher tariffs in 2027 on Chinese semiconductors, Chinese shipping, Nicaraguan labor rights, Brazilian trade practices (ongoing), and international seafood.

The list of specific country-wide trade deals announced last year includes fifteen countries and the EU.

Federal agencies policing fair trade (US Customs Border Protection and Department of Justice) have beefed up their enforcement, have formed a Trade Fraud Task Force and are using the False Claims Act to encourage whistleblower actions.  Other initiatives are extensive and granular, relating to new rules or bans on certain territories, specific Russian companies (oil), supply chains, a National Defense Strategy to support the US Homeland and its critical interests in the Western Hemisphere.

Foregoing is my best understanding as of today.  I urge readers to be alert to the lay of the land, but do NOT rely on specific tariff provisions of today to remain accurate  in the future.  Businesses need to engage tariff advisers or law firms to determine daily specifics and to identify longer-term trade strategies.

Musk–the One Not in Perfume

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Elon moved Tesla from Delaware to Texas; the fight he had in Delaware courts is still continuing–why?

One of my law partners attempted to explain the history of the fight over Musk’s huge compensation package, dating back to 2018.  Actually, some of it is technical legal stuff, and some of it is pretty boring, but the overall picture gives insight into Musk’s incredible focus and the law’s turgid and sometimes overly technical path.  Plus, all things Musk-ish seem to intrigue.

Let’s go back to 2018 when, having successfully obtained huge compensation packages from his board in 2009 and 2012, Musk got a new, multi-billion dollar pay package approved even though he did not have full voting control of the company (and thus the power to pack the board with his personal minions). Delaware law would have applied a more stringent test to board approval (eg a shareholder vote being required) if he controlled the vote to name all directors as a mathematical matter — part of the Delaware balance between favoring corporate management while providing some ultimate protection to shareholders.

Shareholders promptly sued to block the deal, claiming the directors breached their fiduciary duty in approving the huge package.  In October, 2022, the Delaware Chancery Court took five full days of witness testimony, concluded that given his successful past performance and reputation Musk had “soft” or de facto control of the board; the package was voided as there was no shareholder vote.  Plaintiff’s lawyers were awarded $345 Million in attorney’s fees.  [Millions I said–not a typo]

Musk picked up Tesla at that point, moved it to Texas and advised all successful companies to leave Delaware.  He got his raise under Texas law.  But Delaware was not finished with him.

In December of 2025 the Delaware Supreme Court (it sits above Chancery) unanimously reversed the lower court decision, finding that given Tesla’s performance since 2018 Elon deserved the money; they awarded nominal damages of one dollar [a single dollar, not a typo] and killed the $345 Million legal fee; now I am a little fuzzy but I think I heard my partner say that though the plaintiff shareholders lost their lawyers still got a $54 Million fee (last time I lost in court, I didn’t even get carfare home).

The decision turned on factors of how remedies were pleaded, and the Supreme Court (unanimously) failed to address the issue of Musk’s control of the board, nor the fairness of the compensation package, nor the propriety of the board’s original approval.

But wait; there’s more.  The whole episode has led Delaware to amend its corporate statute, only to be faced with litigation that doing so is unconstitutional.  I will spare you the details.

I would be remiss here if I did not put in a plug for our Delaware office, fully expert in all legal matters of Delaware corporate practice.  It seems that no one should just read the Delaware statute and come to the belief that they are clear on what they should be doing.  Forewarned is forearmed.

 

2026 Insights on the Medtech/Bio Front

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This post, longer than most (apologies), reflects take-aways from a one-hour zoom program reflecting thinking at the annual January San Francisco conference on medtech held under JP Morgan auspices.  That zoom was sponsored by MassBio and I am told it was recorded and will be made available; below is my summary and omits some discussion and is intended to be suggestive and not definitive. Speakers included an investment banker, two attorneys and one medtech in-house counsel.

  1. Is 2026 going to be a good year?  Some optimism but no one predicts a boom in funding or M&A (perhaps exits?).  Pessimism in 2025 was based on politics, tariffs, US economy generally, international events; perhaps those factors are today better understood and perhaps players are more willing to deal, but those concerns continue to some degree.  Some areas seem poised to be strong (see below) and one new development is seeming willingness of lenders to support strong emerging companies with non-equity (debt) funding.  Much emphasis on importance of having companies seeking funding or M&A getting their houses in order as diligence will be intense: do you have right people, do you know your market, are you offering something that moves a needle rather than being a modest increment, do you understand applicable reimbursement, do you have strong financial projections.
  2. The future is much about applying AI to bio and medtech.  Strong view that the future is NOW.  Companies that will succeed will be applying AI to process and product fully, and not on a trial balloon, testing basis.  Do players have a plan to integrate AI and have the staff that can use it fully now?  AI as part of the “service offering is a requisite.”  Further, AI  in health care will result in operational efficiency so the lack of staffing today will be eased as doctors and care givers are relieved of many tasks and are able to focus on application of medicine.  Finally, note Open AI and Anthropics have released recent advances in AI to improve medtech, telling you the AI community is active in positioning in medtech.
  3. Beware mid-term elections.  Emphasis is on doing deals before mid-terms, which likely will affect many factors regardless of which party wins and will take time to assess  in terms of investment, market and M&A.
  4. Tariffs had some impact on planning in 2025 and less impact on markets; they remain a question, caused movement of manufacture and supply chains onshore.  Remain a factor in an unknown environment.
  5. Improved health does not reduce need for medicine, procedures, etc; rather as people get healthier they live longer, need more, increase need for procedures.  A major factor that is not yet fully understood is the effect of progress in weight loss.  Rough example: someone weighs 500 pounds, dies or if survives has no incentive to improve body to be functional and live longer; someone down to 200 pounds wants to replace the knee, fix the shoulder, attend to medication more assiduously, etc.
  6.  Acknowledging mixed view of prospects for 2026, what areas are thought to be most promising for funding, M&A?  Cardio, women’s health (with one dissent from the sole female panelist), surgical visualization, ortho, robotic surgery (as use of machines is adopted by more and smaller hospitals).  But nothing “frothy” is to be expected; these are measured predictions.

 

AI: Not Monkey Business

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In 2018 a Federal Circuit Court denied copyright protection to a black macaque monkey who took his own selfie, holding that the Copyright Act required the copyright applicant be a human being.

I am not making this up.

This year the United States Supreme Court has just been asked to consider the denial of copyright to a work wholly authored by a machine, with no human creative contribution.  The application claimed the author was not the company or person that pushed the button on the machine,  but the machine itself.  The Court below, which denied the copyright, had noted that certain works created with the “assistance” of AI, in which created human choices determined the expressive outcome, might be granted statutory protection; but this test case specifically avoided that path for protection by listing the machine itself as author.

The Copyright Act predates AI and machine writings and thus does not specifically bar machine output from protection.  However, strong clues in the statute make clear that the legislation had human beings in mind: for example copyright protection is expressly stated as extending for “life plus 70” years.  But science has marched on, the Copyright Office itself has issued policy papers regarding AI (without abandoning insistence on human input), Congress has looked at the legal landscape (but has yet to act).

Human writers of course are suffering the fear of competition from machines in the writing of books, articles, movie scripts and the like.  To my personal knowledge I know of a friend whose livelihood as an articles writer disappeared well before today, replaced by AI-generated copy.  And AI can, and will, continue to write things that are in the public domain; it is just a question of whether such things will be protected from copying, or whether they can be freely copied as far as the Federal Copyright Act is concerned.  I hesitate to speculate as to whether protection of machine writing might be asserted under theories of unfair competition, noting that I have not seen that argument yet advanced.

If your business produces writings using AI, or hires third parties to perform those tasks, there are methods available to document human input; call your local friendly business lawyer to learn more.

 

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SEC Frees Public Companies to Reject Shareholder Proposals

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[It has been two months since my last post; not that things of interest did not occur, but rather the pace of business, my publication of another book (my eleventh, written with my son Peter, entitled Honig & Son, is available on Amazon) and a birthday vacation to San Juan all conspired to secure my silence.]

Note first that the SEC now has only one Democratic Commission member which means, conversely, that the Republicans are fully in charge.  It is no secret that the tendency of the current Republican consensus is to regulate business less.  Consistent with this tendency, the SEC announced yesterday that it would no longer review requests from public companies relating to their proposed refusal to bring shareholder resolutions to a vote.  In the past, companies typically requested assurance, based on stated facts, that the refusal to bring nonbinding policy matters to a vote (usually involving social issues, the environment or the like) would not run afoul of SEC action.

The effect is that companies will be free to proceed without checking with the SEC– that was always the case, but readers of the tea leaves see this announced policy a evidence of a permissiveness by the SEC and a willingness to rely on corporate judgment.

There is a caveat suggesting questions under Delaware law touching on nonbinding proposals may be answered by the SEC, but that if a reporting company gets a legal opinion that the proposal is not “proper” under Delaware law then that judgment will prevail.  If you find the Delaware situation a bit confusing, you likely are correct.

Needless to say, the sole Democratic SEC commissioner stated yesterday that  this policy was “an act of hostility toward shareholders.”  The historic tension between Republicans and Democrats on the SEC Commission continues unabated, and since the President controls appointments the general views of the administration in power continues to filter down to SEC policy.

Boards in the Future: The Task Ahead

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THIRD OF THREE POSTS BASED ON NACD PROGRAM ON BOARDS AND COMPANIES IN TODAY’S ECONOMY

  • Discussion of whether public companies, now legally required to report their financial and business condition each quarter, should rather be called upon to report every six months (President Trump recently has suggested this semi-annual practice).  Substantial disagreement.  All agreed that it is very time consuming for management and tends to emphasize short-term results as against more important long-term success.  Given the importance of the long term it was suggested that quarterly reports also misled investor.  On the other hand, one panelist noted that US securities markets are dynamic and current reporting supports that dynamic and also supports related operational disciplines; European markets are on a six-month report and their markets were characterized as less dynamic and robust.  Further, given the increased pace of change (political, geopolitical, business), six months is too long to wait for disclosures of impact of and response to change.
  • In response to a question as to whether today was the highest  point of business uncertainty, it was noted that there was a lot of noise and fast changes in policy but nonetheless and so far American companies were doing well operationally, this was nothing like the real crisis of 2008.  Further, there always are uncertainties.  Boards need to be “nimble and agile.”
  • So how can boards in fact be nimble and agile?  Today board members stay in touch with each other, between meetings, much more often than in the past, with paper going back and forth.  At meetings, old practice was a rigid agenda by topic and time allocation; today meetings are/should be based on topics which get the time they need.  Old boards were like a photograph (static) and modern meetings should be like a movie (interactive, all over the place, broad discussion).  One panelist, noting that today some questions come to the board of a highly technical or complex nature, suggested use of subject-matter experts starting board discussions to facilitate discussion of what really are the key points.

Each panelist was asked for “last words” to boards of directors:

  • The board must stay current and use AI to do that
  • Since we are in competition, watch China
  • Keep talking strategy and opportunity, don’t use five-year plans
  • Foster diverse viewpoints and zoom out in discussions and ask important questions where there are no answers

Impacts of AI on the Future of Business

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SECOND OF THREE POSTS BASED ON NACD PROGRAM ON BOARDS AND COMPANIES IN TODAY’S ECONOMY

AI requires boards to act differently.  What exactly does AI accomplish for your particular business?  Boards need strong intelligence on AI, within boards or by consultants.  AI will permit boards to effect operational changes and to analyze effects of change in production equipment, software, sales and the like.  There will be a big shift to data processing use of AI.

AI in a company should not be presented as an experiment; that raises concerns that people will be replaced.  AI should be presented as a tool to be used by persons within the company. Risk: “Everyone is excited to use AI to eliminate somebody else’s job.”  Frame AI internally as a “business enabler” and not a labor replacement.

Deployment of AI must be done with great care to protect company proprietary information or it will be scooped up, read and end up public through being read and used in AI information bases.

In US industry, many manufacturing tasks are being done by older workers.  Younger people are not learning these skills; a big problem.  But some of these skills in the future will be performed differently; workers need to be trained to use AI to ultimately replace older working cadres.  New laborers will more and more use AI to fill the gap in staffing jobs given shortfall in the size of the US labor force (see first post in this series).

While companies should develop AI for use by the new generation of workers who should see  it as a tool, companies must confront the fact that some jobs, involving moving or analyzing that which is on paper, will indeed disappear.

Some countries are facing demographic atrophy, falling birth rates, aging overall population.  Any country in that position will find that AI will assist in maintaining industry; the paper side of operations will lose people who will be available for working in production in the new modality of using AI to supervise actual production.

The personal fear/backlash of the labor forces to the coming of AI may prove to be more acute in Europe, where worker councils are powerfully entrenched; progress there may be slowed thereby.

Boards should “think big” about AI, see what businesses in other industries are doing with AI, conceptualize broad use of AI in thinking about industrial production.

One panelist noted that, over the past two decades, his large US company tended to hire its intellectual workforce from outside the United States, as they found adequate skill sets in people whose salary structure was lower.  Will AI properly used in the US reverse that practice?  Will immigration policy assist in that process?

One panelist noted that in making announcements about projected business they did not include any possible improvements driven by AI.  Under questioning as to why that approach made sense given the power of AI, the reply was that the company used at this point an “auditability standard”–if you cannot see it you should not predict it. AI is used to understand current data but not used to predict profit from future deployment.  There was one panelist who questioned whether that approach was logical when being asked about your future prospects.

The discussion of AI often returned to how AI would shape the future work-force and how to ease those workplace displacements that would occur; in the future AI will be processing paper and actual production will be done by human beings who will spend time monitoring data and electronics that run on AI, rather than standing on the production floor and working with their hands. Younger people need to be trained by schooling and internship to understand how they thus can add value by use of AI.

 

 

Boards/Companies Facing Today’s World

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FIRST OF THREE POSTS BASED ON NACD PROGRAM ON BOARDS AND COMPANIES IN TODAY’S ECONOMY

The world economy is moving from globalization to national focus, with government industrial policy becoming more important.  This is true in the US, Europe, and has long been true in China. Companies need to consider effect of tariffs, export controls and restricted market access.  One effect is that companies are shortening their supply chains to ensure continuity.  Moving manufacture of parts and finished product to the US, in face of tariffs and restrictions of offshore supply or parts, is changing how US businesses staff and operate.

Tariffs are going to create US inflation.  This effect, delayed to some degree by US company planning in stocking up parts and changing some sourcing of parts, will assert itself over years and current lack of huge impact is not an indicator of future inflation impact.

Current US policy will not necessarily build US industry, as intended. If a company sells overseas it may well establish production overseas to meet offshore competition in those markets.  One panelist noted, in considering US tariffs as designed to drive US industry, the effect of tariffs may not be as anticipated: “It’s tough to confirm policy to logic.”

Bring industry to the US also will require more labor and that too is a problem: we do not have enough labor, and we train people not to work in production but rather in services or in intellectual capacities.  By 2033 the US will need 3.8 million more manufacturing employees and we cannot ramp up that fast.  Our educational systems need to redefine the training needed to fill these slots. And the nature of these slots is itself changing: more tech skills will be needed even in production functions (see post hereafter on AI impact).  This is referred to as a move from blue-collar work to “new-collar work.”  The US bias in many quarters to prefer white-collar jobs to the general labor force needs readjustment. The educational response is needed by companies informing high schools, trade schools, and institutions of higher learning as to the training needs of the new economy.

The current immigration policy in face of these labor needs is of course a problem.

Finally, the US has been in a decades-long decline in industrial production and other fall-outs include lack of experience in building new large-scale production facilities.