Page 24 - Delaware Lawyer - Fall 2022

FEATURE
Coexistence?
Vernon R. Proctor
Peaceful
ESG and the Delaware General Corporation Law
Historically, Delaware corporations have been managed by boards of directors for the benefit of stockholders as residual risk bearers. Delaware courts have emphasized the duty of directors to exercise their business judgment to maximize stockholder value. Under the Delaware General Corporation Law (DGCL) and Court of Chancery precedent, management focuses on a single “bottom line,” and financial performance has been the lodestar.
22 DELAWARE LAWYER FALL 2022
Over the past 20 years, stockholder activists and institutional investors have challenged the concept of a
corporation’s purpose. Instead of look- ing solely to stockholders and “share- holder value,” these investors identify multiple “stakeholders” worthy of con- sideration in assessing corporate perfor- mance: employees, customers, lenders, suppliers and communities. The current rubric used for this holistic investment approach is “ESG,” which stands for “environmental, social, governance.”
Investors who seek to “do well by do- ing good” have poured billions of dol- lars into funds whose portfolios score well on such ESG metrics as environ- mental impact, worker well-being and corporate social accountability. In other words, the focus is on a new “triple bot- tom line” measuring multiple capitals: profits, people and planet.1
The common law is a notorious lagging indicator. As the contours of ESG develop, as measurements of the relevant metrics becomemoreprecise,andasrequireddis-