CORPORATE LAW & GOVERNANCE • ENVIRONMENTAL, SOCIAL, & GOVERNANCE
FRAMING THE ISSUES: BOARD DIVERSITY AND CORPORATE PURPOSE
Joel Seligman
This article makes three key claims. First, Board diversity has a long pedigree and has long involved far more than gender, minority, and LGBTQ+ representation. Second, corporate purpose–long described by state corporate law concepts such as those associated with Dodge v. Ford as a primary purpose to generate profits for shareholders–is wrongly conceived in a period dominated by federal securities and other statutes with broader social purposes, many of which do not emphasize shareholder profits. Properly conceived, corporate purpose today is an amalgam of state corporate law’s primary objective of maximizing shareholder profits and federal social purposes which apply regardless of shareholder profitability, including wealth and income allocation through the tax system, environmental protection, labor and health laws, and mandatory disclosure, and independent directors on audit and compensation committees requirements under federal securities laws. Third, much of the debate over greater board diversity is best understood by focusing on the hard question of how much of corporate social objectives is better achieved through regulatory means rather than changes on the board. Nonetheless, two types of diversity are most wisely pursued today: first, gender, minority, and LGBTQ+ representation and second, the creation of corporate boards in leading United States corporations entirely composed of outside or independent directors.
HUMAN RIGHTS & LABOR
SHOULD LABOR ABANDON ITS CAPITAL? A REPLY TO CRITICS
David H. Webber
Several recent works have sharply criticized public pension funds and labor union funds (“labor’s capital”). These critiques come from both the left and right. Leftists criticize labor’s capital for undermining worker interests by funding financialization and the growth of Wall Street. Laissez-faire conservatives argue that pension underfunding threatens taxpayers. The left calls for pensions to be replaced by a larger social security system. The libertarian right calls for them to be smashed and scattered into individually managed 401(k)s.
SECURITIES & FINANCIAL REGULATION • ENVIRONMENTAL, SOCIAL, & GOVERNANCE
SOCIAL GOOD AND LITIGATION RISK
Adam B. Badawi and Frank Partnoy
Questions about corporations and social good have become central in busi- ness law and legal scholarship. Both academics and practitioners are focused on environmental, social, and governance (ESG) issues, and on the the very purpose of corporations. Meanwhile, some commentators and practitioners have begun to hint that these large questions about social good might be linked to litigation risk. We show, for the first time in the literature, that measures of social good and litigation risk are in fact linked, and we explore the important implications of this new finding.
TECHNOLOGY & INNOVATION
MONITORING FACEBOOK
Hillary A. Sale
From Facemash to Facebook to Meta, Mark Zuckerberg’s path and com- pany have been fraught with conflicts, controversy, and even illegality.1 Did he steal the idea from the Winklevoss brothers? Has he invaded people’s privacy? Does he care about privacy? Does he mean what he says?2 Does he respect the law? Does he respect his shareholders? Does he respect his stakeholders? The answer to all of the above appears to be, no.
HUMAN RIGHTS & LABOR
WAGE WARS: THE BATTLE OVER HUMAN CAPITAL ACCOUNTING
Colleen Honigsberg and Shivaram Rajgopal
Over the past few decades, we have seen an explosion of so-called “human capital firms”—that is, firms that generate value due to the knowledge, skills, competencies, and attributes of their workforce. Yet, despite the value generated by employees, U.S. accounting principles provide virtually no information on firm labor. Barely fifteen percent of firms disclose information as basic as labor costs.
HUMAN RIGHTS & LABOR • ENTREPRENEURSHIP & STARTUPS
DOES MANDATORY BOARD GENDER-BALANCING REDUCE FIRM VALUE?
B. Espen Eckbo, Knut Nygaard, and Karin S. Thornburn
Mandated board gender balancing is a social-policy instrument, which in principle is unrelated to concerns about firms’ economic performance. Nonetheless, imposing such a policy may have unintended consequences (positive or negative) for firm value, which is important for all of the firm’s constituencies—not only shareholders. In this paper, we highlight and extend our recent research on the economic effects of Norway’s pioneering gender-quota law, which forced board gender balancing of all domestic public limited corporations by early 2008. This research subsumes and econometrically corrects controversial conclusions of extant studies. Most important, our research shows that quota-induced changes in market valuations and operating performance were both ec- onomically and statistically negligible. Furthermore, we show that corporate conversions to a legal form that prevents the firm from raising public equity capital—but does not require gender balancing—were unrelated to the company’s pre-quota female director shortfall. We also present new evidence that boards managed to preserve directors’ large-firm CEO experience without in- creasing director busyness. We conclude that the supply of qualified female director candidates was sufficiently large to avoid board concentration and negative economic effects of the quota restriction.
CORPORATE LAW & GOVERNANCE • ENVIRONMENTAL, SOCIAL, & GOVERNANCE
BOARD COMMITTEE CHARTERS AND ESG ACCOUNTABILITY
Lisa M. Fairfax
In the last few years, we have witnessed a sharp increase in corporate attention on environmental, sustainability, and governance (“ESG”). This increase has been propelled and buttressed by pressure from an ever-widening array of large and influential shareholders, as well as non-shareholder stakeholders, prompting many to assert that ESG has gone “mainstream.” The steep rise in corporate focus on ESG has inevitably prompted discourse around accountability as we seek to ensure that corporations deliver on their ESG goals and commitments. A wide range of accountability measures has been discussed, proposed, and even implemented, from increased ESG disclosure to tying ESG goals to CEO compensation.