July 21, 2020

“Stakeholder” Governance: Ideals vs. Data

When the BRT made the shift last year from “shareholder primacy,” many wondered what type of action the signatories would take to demonstrate a commitment to stakeholders. Earlier this year, Lynn blogged that 85% of those signatories published a sustainability report – and over half had adopted one or more sustainable development goals.

But this 67-page analysis, from two profs at the London School of Economics & Columbia Business School, suggests the “stakeholder” cynics might be right. Not only did the BRT statement have little impact on signatories’ stock prices at the time it was announced, the data that the professors reviewed showed that relative to industry peers, signatories to last year’s BRT statement:

– Commit environmental and labor-related compliance violations more often (and pay more in compliance penalties)

– Have higher market shares (and thus may face more scrutiny in future M&A transactions)

– Spend more on lobbying policymakers

– Report lower stock returns alphas and worse operating margins

– Have higher paid CEOs

The professors also looked at stocks in the largest ESG ETF and ESG mutual fund and found found “barely any correlation” between the included companies and federal environmental & labor compliance violations. That’s despite large asset managers emphasizing that ESG and sustainability issues are used by them in screening or otherwise evaluating investments, or affect their voting. The professors also question whether ESG scores from third-party vendors accurately reflect ESG behavior.

The professors do acknowledge that their data is not very demonstrative of “governance” factors and is more focused on “E&S” – and one might wonder whether the size of the signatories had an outsized impact on some of these findings. But the results are sobering and suggest that investors who are focused on these issues likely need to do more of their own verification. As if you didn’t have enough surveys already…

Podcast: The Minority Corporate Counsel Association

A few weeks ago, I blogged on “The Mentor Blog” about specific things we all can do to help retain Black lawyers, as the stats are showing that “diversity” efforts to-date aren’t moving the needle and probably need to focus more on equity & inclusion. I continued that conversation in this 30-minute podcast with Jean Lee, who is the CEO & President of the Minority Corporate Counsel Association.

In this podcast, Jean discusses the work that the MCCA has been doing – and why it’s important to have diverse corporate lawyers. Conversation topics include:

– How MCCA assists its members in recruiting, retaining & promoting women and diverse attorneys
– How approaches to improving diversity & inclusion may vary by group
– The business case for diversity
– What types of corporations & law firms are involved with MCCA
– Ways that individuals can advance diversity, equity & inclusion in their day-to-day professional lives

July-August Issue: Deal Lawyers Print Newsletter

This July-August Issue of the Deal Lawyers print newsletter was just posted – & also sent to the printer (try a no-risk trial). It includes articles on:

– M&A Transactions & PPP Eligibility and Forgiveness Considerations
– Strategic Acquisitions of Distressed Companies in the COVID-19 Environment
– Due Diligence: “That Deal Sounds Too Good to Be True”

Remember that – as a “thank you” to those that subscribe to both & our Deal Lawyers print newsletter – we are making all issues of the Deal Lawyers print newsletter available online. There is a big blue tab called “Back Issues” near the top of – 2nd from the end of the row of tabs. This tab leads to all of our issues, including the most recent one.

And a bonus is that even if only one person in your firm is a subscriber to the Deal Lawyers print newsletter, anyone who has access to will be able to gain access to the Deal Lawyers print newsletter. For example, if your firm has a firmwide license to – and only one person subscribes to the print newsletter – everybody in your firm will be able to access the online issues of the print newsletter. That is real value. Here are FAQs about the Deal Lawyers print newsletter including how to access the issues online.

Liz Dunshee