Virginia Harper Ho

The Limits of Enlightened Shareholder Activism

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One of the more visible market shifts over the past decade is the rise of what might be called “enlightened shareholder activism” – the use of shareholders’ governance rights to encourage corporations to take action around environmental, social, and governance (“ESG”) concerns.  A prominent example is the successful campaign in 2021 of “Engine No. 1,” an impact-investing hedge fund that put three directors on the board of ExxonMobil.  The 2022 proxy season seems poised to be another where ESG proposals gain strong support from investors.  

Enlightened shareholder activism has been fueled by regulatory and market changes that have strengthened shareholder … Read more

Modernizing ESG and Climate Risk Disclosure

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On November 3, timed to coincide with the United Nation’s COP26 climate summit in Glasgow, the IFRS Foundation announced prototype global reporting standards for corporate climate and sustainability disclosures, and the formation of the International Sustainability Standards Board (ISSB) to further develop them.  It also announced that it would consolidate under the ISSB two leading sources of climate disclosure guidance, the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation. (Earlier in 2021 the VRF had already brought together two other highly influential standard-setters — the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council).

These … Read more

Nonfinancial Risk Disclosure and the Costs of Private Ordering

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2017 was a year of major developments that are changing how companies disclose nonfinancial environmental, social, and governance (ESG) risk to investors.  In January, regulations implementing the European Union’s 2014 Nonfinancial Reporting Directive took effect for certain large companies operating in Europe and the U.K.  Under these rules, affected companies must prepare a non-financial statement disclosing material environmental, social, human rights, anti-bribery, and diversity matters.  In March, Nasdaq’s Nordic and Baltic stock exchanges introduced voluntary ESG reporting guidelines as part of their contribution to the United Nation’s Sustainable Stock Exchanges initiative on nonfinancial disclosure reform.  And in June, the Task … Read more

How a “Comply or Explain” Rule Would Improve Nonfinancial Disclosure

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In 2016, the Securities and Exchange Commission (SEC) issued a Concept Release on Regulation S-K as part of its comprehensive review of the effectiveness of federal disclosure rules. The release included for the first time a request for comment on whether and how sustainability information should be incorporated into periodic reporting under federal securities law.  The SEC previously issued guidance in 2010 showing how information on material climate-related risks should be disclosed in companies’ financial reports. Other studies have also shown that nonfinancial information (referred to generally as “environmental, social, and governance” (ESG) disclosure) is material to firms, depending on … Read more

The Risk Hypothesis of Shareholder Activism

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The following post comes to us from Virginia Harper Ho, Associate Professor of Law and Docking Faculty Scholar at the University of Kansas School of Law. It is based on her recent paper, “Shareholder Activism & the Risk Hypothesis,” which is available here.

Over the past decade, a seismic shift in U.S. corporate governance toward shareholder empowerment has occurred at the same time as new regulatory mandates focused on risk management and risk oversight. Many of these reforms have been motivated in part by the risk hypothesis of shareholder activism – the view that shareholder empowerment promotes greater corporate … Read more