Companies and their executives are at the forefront of some of the most important and controversial socio-political issues of our time, including Russia’s invasion of Ukraine, voting rights, abortion, gun violence, racial justice, climate change and gender equality. standing in Corporate and business leaders are directly involved in many of these issues through their policies, statements, investments and divestitures. The emergence of this company’s social activism coincides with a growing interest in environmental, social and governance (ESG) focused investments. my new book capitalists and activists explores this complex new reality of modern corporate social activity and the opportunities and challenges it presents to managers, social activists, policymakers, investors, and compliance officers.
Modern corporate social activities
Throughout American history, businesses have played an important role in social affairs. For example, in the 1960s, many companies openly supported the civil rights movement, even in the face of serious and dangerous resistance. Recently, a new modern form of corporate social activity has emerged. This emergence can be traced to her three large-scale, interrelated developments in business, law, and society.
First, increasing expectations for companies to focus on something other than maximizing short-term shareholder wealth have led companies to think more about stakeholders other than shareholders.
Second, the convergence of the public and private spheres due to the increasing privatization of traditional public functions such as prisons and the police will lead to unprecedented public access to private enterprises, such as government remedies and mask mandates. Along with the intervention, it facilitated the involvement of private companies in public social issues.
Third, the expansion of corporate political rights through Supreme Court rulings such as: citizens united When hobby lobby Allowing more open-ended allocation of corporate funds to political campaigns encouraged greater use of business resources to address social issues.
Moreover, these developments are amplified by social media and new financial technologies. Today, activists and citizens can easily organize, communicate, and raise funds to reach business and government leaders like never before. Reach tens of millions of people, raise millions of dollars, and bring thousands of people together to raise awareness and protest issues.
Rise of ESG investment
ESG investing is on the rise in relation to the rise of modern corporate social activity. More and more investors are looking to make a social impact with their capital and invest in successful businesses. In 2021 alone, JP Morgan will: $500 billion are invested in ESG-related funds, up 55% year-on-year.
Indeed, this rise of ESG investing has not come without controversy and resistance. For example, in response to corporate social activism and growing interest in his ESG by asset managers such as BlackRock, state pension funds invested in certain ESG funds in Florida and Texas.
That said, regardless of your position in the debate on the rise of ESG investing, sustainable growth for the foreseeable future is far less controversial. In early 2022, Deloitte announced that by 2024, his ESG-related assets would be nearly $80 trillionor half of all professionally managed assets worldwide.
Opportunities and challenges
The synergy between modern corporate social activity and ESG investing presents incredible opportunities and challenges for capitalists, social activists, businesses, law and society. By carefully working with companies and investors, activists can broaden their reach, make a deeper impact, and improve what they do. At the same time, working with activists enables companies and investors to add value, create new and better markets, and attract more investors and talent to their companies.
Conversely, the rise of modern corporate social activism and ESG investing presents real risks and potential drawbacks if approached rashly. If used coldly, it can further politicize already fragmented markets, marginalize important social issues, and erode core democratic values.
Compliance considerations
Compliance officers can play a key role in managing the opportunities and risks associated with the rise of corporate social activities and ESG investments. In particular, compliance officers can help companies and management adhere to internal policies, state regulations, as well as federal and international regulations related to ESG investing.
When companies talk one-sidedly about their ESG efforts to attract capital and consumers, and act in opposite ways in practice and in operations, the risks of reputational damage and legal liability are real and substantial. Consumers, investors, and the media are now paying particular attention to perceived or actual hypocrisy from companies and their executives.
In addition, state and federal regulators, such as the Securities and Exchange Commission, have also become more vigilant in scrutinizing companies’ promotions and practices in this area as their social and ESG interests grow. I was.
Outlook
After all, the growth of modern corporate social activism and ESG investing is, in some ways, the story of how new private market approaches can meet and overcome old yet pressing societal challenges. . This is one of the most important stories of business and society in recent history, and legal and compliance personnel will play a key role in shaping this unfolding narrative.
Tom CW Lynn is the Jack E. Feinberg Distinguished Law Professor at Temple University’s Beasley School of Law and an Academic Fellow in the Center for Law, Economics and Finance at George Washington University. This article is based on his new book, capitalists and activistsAvailable here.
The views, opinions and positions expressed in all posts are those of the authors only and do not represent the views, opinions and positions of the Program in Corporate Compliance and Enforcement (PCCE) or New York University School of Law. PCCE makes no representations as to the accuracy, completeness, validity, or statements made on this site and is not responsible for any errors, omissions or representations. The copyright or this content belongs to the author, and the author is responsible for any infringement of intellectual property rights.
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