3CL Seminar: 'Leading Wherever They Want? CSR, ESG and Directors’ Duties'

Speaker: Professor Jens Binder (University of Tübingen)

On board sides of the Atlantic, the role of ‘public’ corporations, i.e., corporations listed on stock exchanges and held by a broad range of individual and institutions shareholders, as promoters of the interest of stakeholders has been debated intensively in recent years. Of late, the focus of the debate has been expanded, and covers no longer the social responsibility of firms (“corporate social responsibility”, or “CSR”, but also – and in particular – the role of corporations for the protection of the environment and global climate (discussed under the broader concept of “ESG”, for “environmental – social – governance”). As part of the debate, academics and practitioners alike have gone as far as to argue that the fundamental ‘purpose’ of corporations should be reinterpreted (and adjusted in practice): Rather than focusing on the profitability of the firm in the interest of shareholders, corporations’ long term strategies, business models and corporate decisions should be geared more towards the protection of stakeholder interests. Within the European Union, these movements have led to the adoption of an ever more complex regulatory regime over time. Starting with a – recently reformed and expanded – regime of non-financial reporting requirements, the EU legislator has attempted to provide investors and markets as a whole with information as to firms’ CSR or ESG policies and activities, in the expectation that this would incentivise investors to exercise their influence on corporate decision making with a view to improving firm performance in this regard. While this framework has been confined to procedural rather than substantive regulation, leaving the formulation of relevant strategies largely to corporate boards, a shift of paradigm can be expected under the Commission Proposal for a new Corporate Sustainability Due Diligence Directive of 2022, which anticipates a broad range of substantive duties for corporate management in the field. The Chapter examines these trends and their implications for the legal duties of corporate directors from a theoretical and comparative background. It finds that positive, prescriptive obligations to cater for stakeholder interest are inconsistent with both corporate law systems traditionally following the shareholder value doctrine and those allowing for a greater role of stakeholder concerns to be addressed in corporate decisionmaking. It also presents a critical analysis of the regulatory policy followed in the EU, arguing that neither the current nor the incoming framework provides a clear-cut, coherent set of specific obligations but leave a wide margin of discretion and, thus, facilitate manipulative, evasive strategies instead.

3CL runs the 3CL Travers Smith Lunchtime Seminar Series, featuring leading academics from the Faculty, and high-profile practitioners.

Enquiries to: 3cl@law.cam.ac.uk