Archive for the ‘Corporate Social Responsibility’ Category

Responding to Corporate Political Disclosure Initiatives

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday January 30, 2015 at 9:00 am
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Editor’s Note: The following post comes to us from Robert K. Kelner, partner in the Election and Political Law Practice Group at Covington & Burling LLP, and is based on a Covington Alert by Mr. Kelner, Keir D. Gumbs, and Zachary Parks. Recent work from the Program on Corporate Governance about political spending includes: Shining Light on Corporate Political Spending by Lucian Bebchuk and Robert J. Jackson, Jr. (discussed on the Forum here). Posts related to the SEC rulemaking petition on disclosure of political spending are available here.

Despite recent setbacks, efforts by activist groups to pressure companies to disclose details of their political activities are not going away. As these groups become increasingly sophisticated, 2015 looks to be their most active year to date. In fact, for the first time ever, the Center for Political Accountability plans to issue a report this year ranking the political spending disclosure practices of all 500 companies in the S&P 500 Index. This post highlights recent developments regarding corporate political spending disclosure efforts, looks ahead to what public companies can expect in the near future, and provides strategies and tips for those grappling with disclosure issues.

…continue reading: Responding to Corporate Political Disclosure Initiatives

Diversity on Corporate Boards: How Much Difference Does “Difference” Make?

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday January 5, 2015 at 2:05 pm
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Editor’s Note: The following post comes to us from Deborah L. Rhode, the Ernest W. McFarland Professor of Law and Director of the Center on the Legal Profession at Stanford University, and Amanda K. Packel, the Deputy Director of the Arthur and Toni Rembe Rock Center for Corporate Governance, a joint initiative of Stanford Law School and the Stanford Graduate School of Business.

In recent years, increasing attention has focused on the influence of gender and racial diversity on boards of directors. More than a dozen countries now require some form of quotas to increase women’s representation on boards, and many more have voluntary quotas in corporate governance codes. In the United States, support for diversity has grown in principle, but progress has lagged in practice, and controversy has centered on whether and why diversity matters.

In our article, Diversity on Corporate Boards: How Much Difference Does “Difference” Make?, which was recently published in Delaware Journal of Corporate Law, 39, no. 2, Fall 2014, we evaluate the case for diversity on corporate boards of directors in light of competing research findings. An overview of recent studies reveals that the relationship between diversity and financial performance has not been convincingly established. There is, however, some theoretical and empirical basis for believing that when diversity is well managed, it can improve decision-making and enhance a corporation’s public image by conveying commitments to equal opportunity and inclusion. We believe increasing diversity should be a social priority, but not for the reasons often assumed. The “business case for diversity” is less compelling than other reasons rooted in social justice, equal opportunity, and corporate reputation. Our article explores the rationale for diversity and strategies designed to address it.

…continue reading: Diversity on Corporate Boards: How Much Difference Does “Difference” Make?

The First Annual Conflict Minerals Filings: Observations and Next Steps

Posted by Amy L. Goodman, Gibson, Dunn & Crutcher LLP, on Saturday December 20, 2014 at 11:57 am
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Editor’s Note: Amy Goodman is a partner and co-chair of the Securities Regulation and Corporate Governance practice group at Gibson, Dunn & Crutcher LLP. The following post is based on a Gibson Dunn alert.

As companies prepare for the second year of filings under the Securities and Exchange Commission’s (“SEC”) new conflict minerals rule, many companies are looking for guidance from the first annual filings, which were due June 2, 2014. As expected, the inaugural Form SD and conflict minerals report filings reflect diverse approaches to the new compliance and disclosure requirements. We offer below some observations based on the first round of conflict minerals filings for companies to consider as they address their compliance programs and disclosures for the 2014 calendar year. It is important to note, however, that the shape of future compliance and reporting obligations will be impacted by the outcome of the pending litigation challenging the conflict minerals rule, which also is discussed below, and any subsequent action by the SEC.

…continue reading: The First Annual Conflict Minerals Filings: Observations and Next Steps

Shareholder Proposals on Social and Environmental Issues

Editor’s Note: Matteo Tonello is managing director of corporate leadership at The Conference Board. This post relates to an issue of The Conference Board’s Director Notes series authored by Melissa Aguilar and Thomas Singer. The complete publication, including footnotes, is available here.

Political spending and climate change, key topics during the 2014 proxy season, are expected to feature heavily again in 2015 shareholder proposals. This post reviews the content of the social and environmental proposals voted on most frequently by shareholders of Russell 3000 companies during the 2014 season, including the topics that received the highest average shareholder support. The complete publication provides examples of proposal text and sponsor supporting statements, as well as board responses and related corporate disclosure.

Nearly 40 percent of all shareholder proposals submitted at Russell 3000 companies that held meetings during the first half of 2014 were related to social and environmental policy issues, up from 29.2 percent in 2010, as documented in Proxy Voting Analytics (2010-2014). Social and environmental policy proposals now represent the second-largest category of the subjects in terms of both the number submitted and the number voted, narrowly behind corporate governance.

…continue reading: Shareholder Proposals on Social and Environmental Issues

ESG Risks and Opportunities Facing Investee Companies

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday November 30, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Rakhi Kumar, Head of Corporate Governance at State Street Global Advisors, and is based on an SSgA publication; the complete publication is available here.

As part of our active ownership process, State Street Global Advisors (“SSgA”) considers environmental, social and governance (“ESG”) matters while evaluating and engaging with investee companies. SSgA believes that ESG factors can impact the reputation of companies and can also create significant operational risks and costs to businesses. Conversely, well-developed corporate social responsibility (“CSR”) programs [1] can generate efficiencies, enhance productivity and mitigate risks, all of which impact shareholder value.

…continue reading: ESG Risks and Opportunities Facing Investee Companies

Making It Easier for Directors To “Do The Right Thing”

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday November 10, 2014 at 9:00 am
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Editor’s Note: The following post is based on a recent Harvard Business Law Review article by Leo Strine, Chief Justice of the Delaware Supreme Court and a Senior Fellow of the Harvard Law School Program on Corporate Governance. The article, Making It Easier For Directors To “Do The Right Thing”, is available here. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Leo Strine, Chief Justice of the Delaware Supreme Court, and the Austin Wakeman Scott Lecturer on Law and a Senior Fellow of the Harvard Law School Program on Corporate Governance, has recently published an article in the Harvard Business Law Review. The essay, titled Making It Easier For Directors To “Do The Right Thing”, is available here. The essay posits that benefit corporation statutes have the potential to change the accountability structure within which managers operate and thus create incremental reform that puts actual power behind the idea that corporations should “do the right thing.”

The abstract of Chief Justice Strine’s essay summarizes it briefly as follows:

…continue reading: Making It Easier for Directors To “Do The Right Thing”

Nanotechnology and the S&P 500

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday November 3, 2014 at 9:16 am
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Editor’s Note: The following post comes to us from Heidi Welsh, Executive Director at the Sustainable Investments Institute (Si2), and is based on a Si2 report.

Corporations globally have been investing $9 billion annually in nanotechnology, yet less than one-tenth of S&P 500 companies report to shareholders and other stakeholders on their involvement in nanotechnology. Although it has the potential to revolutionize industries like healthcare, information technology and energy systems, nanotechnology’s promise is tethered to unique environmental, health and safety (EH&S) issues that are not yet fully understood. Investors eyeing rapid growth and minimal regulation are engaging companies in discussions about nano-related EHS risks and recently forced a vote on the first nano-related shareholder resolution.

…continue reading: Nanotechnology and the S&P 500

Radical Shareholder Primacy

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday September 24, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from David Millon, the J.B. Stombock Professor of Law at Washington and Lee University.

My article, Radical Shareholder Primacy, written for a symposium on the history of corporate social responsibility, seeks to make sense of the surprising disagreement within the corporate law academy on the foundational legal question of corporate purpose: does the law require shareholder primacy or not? I argue that disagreement on this question is due to an unappreciated ambiguity in the shareholder primacy idea. I identify two models of shareholder primacy, the “radical” and the “traditional.” Radical shareholder primacy makes strong claims about both shareholder governance rights, conceiving of management as the shareholders’ agent, and also about corporate purpose, insisting that corporate law mandates shareholder wealth maximization. Because there is no legal basis for either of these claims, those who deny that shareholder primacy is the law are correct at least as to this model. However, the traditional version of shareholder primacy accords to shareholders a special place in the corporation’s governance structure vis-à-vis the corporation’s nonshareholder stakeholders, for example, with respect to voting rights and the right to bring derivative suits. Beyond this privileged position in the horizontal dimension, there is no maximization mandate and corporate law does very little to provide shareholders with the tools necessary to exercise governance powers; there is no primacy in the vertical dimension or on the question of corporate purpose. Nevertheless, this conception of shareholder primacy—modest as it is—is enshrined in corporate law. Those who deny that shareholder primacy is the law need to acknowledge this fact, but once it is understood that traditional shareholder primacy has little in common with the radical version there is no reason to be reluctant to do so.

…continue reading: Radical Shareholder Primacy

Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around The World

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday September 8, 2014 at 9:16 am
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Editor’s Note: The following post comes to us from Alex Edmans, Professor of Finance at London Business School; and Lucius Li and Chendi Zhang, both of the Finance Group at the University of Warwick.

In our paper, Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around The World, which was recently made publicly available on SSRN at, we study the relationship between employee satisfaction and abnormal stock returns around the world, using lists of the “Best Companies to Work For” in 14 countries.

Theory provides conflicting predictions as to whether employee satisfaction is beneficial or harmful to firm value. On the one hand, employee welfare can be a valuable tool for recruitment, retention, and motivation. For the typical 20th-century firm, the bulk of its value stemmed from its physical capital. In contrast, most modern firms’ key assets are their workers. Employee-friendly policies can attract high-quality workers to a firm and ensure that they remain within the firm, to form a source of sustainable competitive advantage.

…continue reading: Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around The World

From Institutional Theories to Private Pensions

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday September 3, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Martin Gelter, Associate Professor of Law at Fordham University.

I recently posted my forthcoming book chapter, From Institutional Theories to Private Pensions (in Company Law and CSR: New Legal and Economic Challenges, Ivan Tchotourian ed., Bruylant 2014) on SSRN.

Corporate governance is sometimes described by political scientists as a three-player game between capital, management, and labor. Yet, in most contemporary debates about corporate governance among lawyers and economists, especially in the English-speaking world, the agency problem and conflicts of interest between shareholders and management seem to be single conflict of interest to which much attention is paid. In this chapter, which builds on previously published law review articles, I attempt to put this observation into a larger historical context, arguing that the nearly exclusive focus on the concern of shareholders is historically and geographically contingent. Differences between conflicts of interest in different corporate governance systems have long been recognized in the scholarly literature. Most obviously, it is well known that the majority-minority agency problem is more salient than the one between shareholders and managers in countries where concentrated ownership is more common. However, it is also worthwhile to look at other conflicts in the tripartite structure of corporate governance that may be equally relevant, at least under certain circumstances. Most importantly, the interests of employees are often relegated either to employment law, or are interpreted as an aspect of corporate social responsibility and thus dismissed as an issue promoted by “sandals-wearing activists” that are effectively only a distributive concern.

…continue reading: From Institutional Theories to Private Pensions

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