In this short presentation in a virtual town hall meeting setting, Mr. Chris Bayer, the author of the 2011 Tulane Study on the economic impact of Conflict Minerals compliance talks to us about the new survey that is currently under progress. As participants you will have a chance to learn first-hand from Mr. Bayer about his insights into the world of conflict minerals even as you prepare for compliance under Section 1502 of the Dodd-Frank Act. You will know why it is important to spare a little time to complete Mr. Bayer's follow-up survey on how your organization has been going about Conflict Minerals compliance. For your information, here's a link to the follow-up survey: http://www.payson.tulane.edu/dfs1502-survey-corporate-efforts.

1. Speaker: CHRIS BAYER
Candidate for Ph.D. in International Development
Virtual Town Hall Meeting Series on
3rd Party Ecosystem Risks in a Changing Climate of Regulations and Activism
Dodd-Frank
Section 1502:
Stag Hunt
presents

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RiskWatch Virtual Town Hall
Dodd-Frank Section 1502: Stag Hunt
August 6, 2013
Chris Bayer
PhD Candidate
Tulane University

3. Part 1 – Conflict Minerals
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4. Stag Hunt
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vs.

5. Stag Hunt
• Two hunters. Two types of game are available: stag or hare
• To shoot a stag, you must have the cooperation of the
other in order to succeed – but a hare you can get by
yourself
• Dilemma: you will definitely eat if you yourself go after the
hare, but the outcome of the stag score is less certain
• 2 risks: stag is never shot, or the other hunter defects
• Do you take the risk of cooperation, or do you do your
own thing?
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6. Possible stag hunt scenarios
in conflict mineral case
1. mineral-based industry exposing itself to the DRC
situation in the 90s and first decade in 2000
2. re-organization of supply chain systems under Dodd-
Frank (e.g. information sharing platforms)
3. participation in 2013 Tulane survey
• prerequisite: pre-competitive organization
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7. Tulane’s 2011 projection
Task 3rd model estimation of costs
1. Strengthening internal
management systems in view of
performing due diligence
$26 million for the 5,994 issuers; $5.14
billion for 1st tier suppliers to those
issuers, for a total of $5.17 billion
2. Instituting the necessary IT
systems (to collect information
and maintain auditable records for
the SEC)
$884 million for issuers who are small
companies; $1.68 billion for issuers who
are large companies, for a total of $2.56
billion
3. Commissioning CMR audit As only issuers are required to conduct
audits: $81 million for issuers who are
small companies; $126 million for
issuers who are large companies, for a
total of $207 million
Total $7.93 billion
(including internal company labor) 7

8. Recent relevance
• On July 23, 2013 the SEC won a ruling from U.S.
District Judge Robert Wilkins in Washington, D.C..
• He said the agency had not acted arbitrarily or
capriciously in its rulemaking on the conflict
minerals law.
• Wilkins’ ruling pointed out that the SEC had
“placed particular emphasis” on the cost studies
from Tulane and NAM in finalizing the rules, even
though the industry disagreed with the final
requirement
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9. • But what efforts and resources are
companies now actually expending in
order to comply?
• Enter Tulane’s July/August 2013 survey
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10. http://www.payson.tulane.edu/dfs1502-survey-corporate-efforts
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11. Tulane’s July/August 2013 survey
Section # of questions
A. Company Profile 8
B. Overall Implementation Status 2
C. Internal Resources Leveraged 1
D. External Resources Leveraged 5
E. Synergy 9
F. Perceived Advantages 1
G. Legislative Alternatives 1
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12. Two reasons for participating
• Learn what your peers are doing
• Macro-level picture will allow stakeholders to
appreciate economic impact of law
(If you haven’t already, please participate in the survey)
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13. Part 2 – The Bigger Picture
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14. A few milestones of disclosure law
• Securities Exchange Act of 1934
– to help the symmetry of information assumption along,
Congress crafted a mandatory disclosure process in which
companies make information public that investors would
find pertinent to making investment decisions
• Home Mortgage Disclosure Act of 1975
– provides to the public loan data that can be used to assist:
• in determining whether financial institutions are serving the
housing needs of their communities
• in distributing public-sector investments in identifying possible
discriminatory lending patterns
• Sarbanes–Oxley Act of 2002
– requires internal controls for assuring accuracy of financial
reports
– mandates enhanced financial disclosures
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15. The two other 2010
“Specialized Corporate Disclosure” laws
• Section 1503 requires any reporting issuer that is a mine
operator, or has a subsidiary that is an operator, to disclose
to the SEC information related to health and safety
violations, including the number of certain violations,
orders, and citations received from the Mine Safety and
Health Administration (MSHA)
• Section 1504 requires reporting issuers engaged in the
commercial development of oil, natural gas, or minerals to
disclose in an annual report certain payments made to the
United States or a foreign government
– Under the new “Disclosure of Payments by Resource Extraction
Issuers” Rule adopted in late August 2012, issuers must disclose
all payments (or aggregation of related payments) of $100,000
or more to foreign (and U.S.) governments for such activities
Source: SEC. http://www.sec.gov/spotlight/dodd-frank/speccorpdisclosure.shtml
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16. Global Compact
Global Compact, a 1999 UN-spearheaded multi-
stakeholder initiative resulting in the formulation of 10 CSR
principles:
Principle 1
• Businesses should support and respect the protection of
internationally proclaimed human rights within their
sphere of influence.
Principle 2
• Businesses should ensure that their own operations are
not complicit in human rights abuses.
– DO NO HARM! - Don’t do business with human rights
violators 16

17. DRC engagement prospects
• Engaging the Congo is in our national interest
o DRC is under-leveraged – offers high return on the dollar
 e.g. the China deal: $ 6 billion worth of infrastructure in exchange for $50 billion dollars
worth of minerals – which translates to a profit of 833%
o One estimation has the DRC’s mineral deposits worth $24 trillion
o The Congo rainforest is the world’s second largest carbon sink
o If Afghanistan taught us anything is that the world can’t afford failed
states
• Relative security conditions a prerequisite for constructive
engagement
o Risk of engagement are high
 Security, in spite of the 17,000 UN troops in the Congo
 chaotic regulatory environment / broken contracts
o Not deterring China / India
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18. Conflict – commodity link
• In the last 60 years, at least 40 per cent of all
intrastate conflicts had a link to natural resources
– this link doubles the risk of a conflict relapse in the first five years
• as per the United Nations Environment Programme (UNEP)
• Since 1990, at least 18 violent conflicts have been
fuelled by the exploitation of natural resources
– whether ‘high-value’ resources like timber, diamonds, gold,
minerals and oil
– or scarce ones like fertile land and water
• With how many other armed groups, with “resource
imperatives” causing human rights violations, are we
indirectly doing business?
Source: UNEP. http://postconflict.unep.ch/publications/pcdmb_policy_01.pdf
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19. Universality of the D-F Section 1502 principle
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20. Violent conflicts in 2011
Source: Heidelberg Institute for International Conflict Research
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Source: USGS. http://afghanistan.cr.usgs.gov/hyperspectral-maps

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