Over the past decade, many companies have embraced the language and practices of stakeholder governance. Corporate mission statements, sustainability reports, and ESG disclosures frequently highlight commitments to employees, communities, and environmental sustainability. Boards authorize charitable-giving programs, diversity initiatives, and policies targeting carbon emissions that produce real benefits for non-shareholder constituencies. These efforts can influence corporate culture, societal wellbeing, and the public reputation of a company. As a result, companies may generate substantial goodwill with employees, consumers, and regulators by presenting themselves as responsible corporate citizens.

But a closer look reveals an important limitation: Stakeholder commitments frequently unravel during periods of institutional and governmental change. In a recent article, I examine the phenomenon of corporations that publicly embrace prosocial and pro-stakeholder causes yet abandon those commitments at precisely the moments when they matter the most, such as during M&A activity and shifts in government power. The events that trigger stakeholder abandonment differ in important ways. Some are endogenous, arising from internal corporate decisions such as selling the company or taking the company public through an initial public offering (IPO). Others are exogenous, driven by external forces such as elections or regulatory shifts, with particularly significant changes following the re-election of President Donald Trump.

Despite a handful of differences, these moments share many features that help explain the shift in stakeholder treatment. They are moments of heightened risk and increased uncertainty. Uncertainty about financial impact, litigation, and the scope of the board’s fiduciary duties – including when the famous Revlon duties attach – has a chilling effect on stakeholder considerations in dealmaking activity. Government policies targeting diversity initiatives, sustainability efforts, and other stakeholder causes, regardless of the merits of these policies, likewise have a chilling effect on stakeholder governance following shifts in executive power. At the same time, many of these changes occur with limited transparency. Companies frequently reduce or abandon stakeholder initiatives without explicit disclosure in filings or transaction documents. Stakeholders who relied on earlier commitments may receive little notice that those commitments have been quietly scaled back.

Such abandonment is not necessarily evidence that stakeholder governance is illusory. Rather, it demonstrates that times of change are periods of rearranging priority among those with a stake in the corporation. Many players have an interest in the corporation – shareholders, of course, but also employees, suppliers, customers, and communities, among others. Each corporation will have implicitly established a hierarchy among its stakeholders in the ordinary course. This hierarchy will naturally differ between corporations. During times of change there is an implicit rearranging of the priority of stakeholder claims on the corporation’s resources, attention, and time. In an M&A transaction, it is the financing parties and shareholders whose claims are elevated, while the others are subordinated to the interests of these players. For example, financing parties may receive third-party beneficiary status for the purpose of certain provisions in a merger agreement (in addition to the terms of any lending agreement), and when Revlon is triggered, the board must attempt to get the best value reasonably available for its shareholders in the sale. Employees, by contrast, receive little protection in deals. They are not parties to the merger agreement, nor are they third-party beneficiaries or otherwise granted meaningful protection. Following Trump’s election to a second term, many stakeholder claims have been rearranged and reprioritized because of changing risks, particularly when it comes to employee diversity, customer safety, and climate impact.

When viewed in the context of changes in the priority given to differing stakeholder constituencies, it becomes clear that while stakeholders may get less consideration overall in times of transition, their interests are not eradicated entirely. For example, Trump recently announced a task force “to eradicate anti-Christian bias,” a favorable signal for religious (particularly Christian) views that has made it less risky for corporations to embrace certain religious causes. As a result, religious stakeholders now have more power and greater priority in the corporate stakeholder hierarchy. The reprioritization of stakeholder interests thus may explain why there has been no similar walking back of religious commitments, or other matters that may be considered “conservative” stakeholder interests, among for-profit corporations following Trump’s re-election.

This phenomenon raises important questions for corporate governance, securities regulation, and the debate over corporate purpose. To increase accountability and transparency in corporate governance, a range of doctrinal and policy proposals may prove useful, such as more disclosure, contractual obligations, and third-party certifications. Yet as currently structured, they provide neither durable commitments nor transparency about abandonment of commitments.  The result is that many companies continue to benefit from corporate goodwill – reputational capital built through stakeholder-oriented messaging – even after reneging on longstanding commitments.

Corporate stakeholders increasingly rely on companies’ public commitments to social and environmental goals. Yet those commitments often prove fragile when corporations face moments of transition. By examining the dynamics that drive this pattern, the article highlights the importance of transparency, institutional design, and accountability in modern corporate governance. Ultimately, the question addressed in the article is not whether companies should pursue stakeholder governance, but whether the commitments they make to employees, communities, and society, can – and should – be durable enough to withstand the pressures of change.

Caley Petrucci is an associate professor of law and co-director of the Center for Corporate and Securities Law at the University of San Diego School of Law. This post is based on her recent article, “Corporate Goodwill,” available here.