On Friday, June 19, 2020, the Executive Committee of the Business Law Section approved the formation of a working group to consider whether—and if so, how— California business lawyers should or could support stakeholder capitalism and the investment trend known as ESG (Environment, Social, Governance), a standard used by a number of investors to screen investments based on those factors.
Stakeholder capitalism (the “G” in ESG) is a new and evolving model for corporate governance by which corporate directors and officers agree to operate companies not only for the short-term benefit of shareholders, but also to: (i) deliver value to customers; (ii) invest in employees; (iii) deal fairly and ethically with suppliers; (iv) support the communities in which they operate, including protection of the environment by embracing sustainable practices; and (v) generate long term value for shareholders.
Stakeholder capitalism has been gathering momentum nationally since the onset of the COVID-19 pandemic with its adverse impact on the American economy, particularly on employment, and most recently the nationwide protests following the death of George Floyd. These events have served to accelerate the debate over what the proper role of American business should be, if businesses should do more, and whether there is an adequate legal foundation to support that new role. The working group’s efforts will be determined by the group itself and could proceed in several directions. For example, the group could survey California lawyers to measure how successful the existing provisions for social purpose and benefit corporations have been and to identify issues that companies who are not organized under those statutes have faced in attempting to operate in a way that benefits all stakeholders. The group could research and consider whether or not there are potential changes in the law that could be made to provide greater flexibility to companies that wish to implement an ESG focus. The group could also sponsor MCLE presentations on these topics and liaise with other Sections of the California Lawyers Association.
The Business Law Section seeks California business lawyers interested in actively contributing to the working group. If you are interested, please contact the chair, Suzanne L. Weakley, at email@example.com. Please include a brief statement of your background, interests, and why you wish to be a part of the group. We will seek and prioritize a diverse membership with meaningful expertise in current law, the ability to approach the topics objectively, and the willingness to participate actively in group projects.