Plenary Session – ESG Wars: Managing Conflicting Social and Political Demands on the Modern Corporation

Everyone, it seems, has an opinion about Environmental, Social, and Governance (ESG) matters. These opinions can, however, be very inconsistent, and can expose some corporations to impossibly conflicting demands. Some states legislate against ESG initiatives as manifestations of an anti-social “woke” agenda. Other states take the polar opposite position, viewing ESG initiatives as pro-social and wealth enhancing, and mandating respect for ESG initiatives that are elsewhere prohibited. Corporations must also consider diverse investor, employee, and customer constituencies that can have highly heterogeneous but deeply held preferences for various forms of social action. Institutional investors have also announced opposition to the reelection of directors perceived as insufficiently attentive to climate and other ESG concerns. It is only a matter of time until other investors announce similar policies targeting directors deemed to be “too woke.” If that isn’t sufficiently challenging, litigation now looms as shareholders have sued several boards for failing to follow through on various ESG commitments, and for failing adequately to prepare for a net zero transition. Some commenters speculate that this friction will promote the emergence of “blue” and “red” corporations that position their ESG profiles to attract very different investor, employee, and customer bases. How should boards respond to these challenges? When and how should corporations be proactive in confronting these challenges and when should they lie low and be reactive? How can boards address investor, employee, and customer concerns along with various state laws in a manner that recognizes the disparate preferences that exist within all these constituencies? This panel will address key governance challenges posed by the ESG wars, and proposes concrete, substantive measures that boards can apply to navigate these treacherous shoals.