Sky Blog
In late 2019, somewhat surprisingly, the Business Roundtable issued a brief statement advocating “a fundamental commitment to all of our stakeholders,” thus ending its decades long singular commitment to shareholder value.
The statement triggered an intense global debate about the …
Late in the afternoon of the Friday before Election Day, the Department of Labor finalized a rule that requires pension and retirement plan fiduciaries to consider only financial interests when investing plan funds. On its face, the rule seems anodyne. …
In the United States this past year, growing movements for social, racial and environmental justice, and the impact of an unprecedented health crisis, have coincided with a range of institutions increasing their focus on promoting environmental, social and governance (“ESG”) …
Economist Albert O. Hirschman (1970) classically set out the two alternatives facing dissatisfied members of an organization: They can voice displeasure or exit for greener pastures. Hirschman’s model has long explained the tradeoff facing shareholders of a poorly governed firm: …
In a new paper, I document a recent and strong standardization in the structure of executive compensation. This standardization is unexpected since, in principle, the optimal incentive contract is a function of many factors that vary among firms. Executives receive …
Corporate purpose is having a moment, as it seems to do each generation or so. The Business Roundtable made waves last year by pivoting away from shareholder centrism in its “redefinition” of corporate purpose. Directors, officers, institutional investors, and others …
My article, Corporate Family Matters, proposes a definition of and governance regime for a particular type of corporate group – the family. I define the family as an enterprise formed by weaving corporations, partnerships, and LLCs together into a …
Institutional investors are increasingly playing a major role in the shift toward stakeholder capitalism. They are also facing pressure from their clients and others to focus more on ensuring that their investments promote corporate sustainability. Such expectations are reinforced by …
On December 1, the Nasdaq Stock Market asked the Securities and Exchange Commission (SEC) for authority to adopt new listing rules aimed at increasing board gender and racial diversity. If approved, Nasdaq-listed companies will be required to disclose their board …
Two recent decisions of the Delaware courts confirm that Section 220 of the Delaware General Corporation Law will be consistently interpreted to grant pre-complaint discovery to stockholders seeking to prepare fiduciary-breach litigation.
In Pettry v. Gilead Sciences, Inc., a …
Sustainability in business and environmental, social, or governance (ESG) factors in finance have entered the mainstream. In 2020, the CEO of Blackrock wrote: “Our investment conviction is that sustainability and climate integrated portfolios can provide better risk-adjusted returns to investors.”…
What do the emergence of independent directors in South Korea, the legal reforms on related-party transactions in India, the continued rise of environmental, social, and governance (ESG) factors in the United States, and the global spread of corporate governance codes …
In a 1987 paper, available here, we argued that non-investor stakeholders play an important role in influencing financial policy and corporate valuation. We also distinguished explicit claims between a company and its counterparties from what we called implicit claims. …
On October 29, 2020, The New York State Department of Financial Services (“DFS”) published an industry letter (the “Industry Letter”) for banks and other financial institutions that it regulates that details the range of climate change risks that could soon …
In our recent paper, Can Governance Help in Making an IPO “Successful”? New Evidence from Europe, we find that corporate governance affects company performance after an IPO in different ways. We consider an IPO to be successful if it …
Historically, how a corporation invests and pursues its goals has been recognized as within the discretion of the board of directors. The business judgment rule insulates directors from liability for exercising that discretion by restricting second-guessing from shareholders absent a …
With the prospect of global vaccines on the horizon, companies worldwide continue to address the challenges of pandemic management and recovery on their businesses, the communities and constituencies they serve and especially on their employees. As companies seek to prioritize …
In August 2019, the Business Roundtable released a statement redefining the purpose of a corporation to maximize value “for the benefit of all stakeholders – customers, employees, suppliers, communities, and shareholders.” The statement was signed by 181 CEOs, including Jamie …
On October 30, 2020, the US Department of Labor (DOL) published Financial Factors in Selecting Plan Investments (the Rule) and a related Fact Sheet, a codification of the spirit, if not the exact words, of a controversial proposal issued …
Corporate social responsibility (CSR) is typically assumed to be a voluntary rather than mandatory initiative. Yet, over the past few decades, a growing number of countries have adopted laws that explicitly require corporations to undertake CSR.
To date, most scholarly …