Skadden's "Social Responsibility and Enlightened Shareholder Primacy: Views From the Courtroom and Boardroom" is an instructive tutorial or refresher for all for-profit, Delaware-incorporated companies - as well those companies incorporated in other jurisdictions subject to a shareholder primacy corporate law framework - on how to consider, subject to the confines of governing law, pressures or demands imposed by investors, watchdog groups, proxy advisors, rating agencies, employees, consumers, and others to focus on particular ESG issues.
Notably, the memo emphasizes that a for-profit corporation form (as opposed to, e.g., a benefit or philanthropic corporation) is a choice that - once made - imposes a fiduciary duty obligation on directors to make decisions aimed solely at maximizing the company's value for the benefit of its stockholders. Companies' ESG-related decisions - which, like other decisions, can trigger breach of fiduciary duty or corporate waste challenges - thus need to be carefully considered to ensure they have a sufficient link to shareholder value.
Skadden capsulizes CSR/ESG-related decision-making within the applicable legal framework this way:
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Importantly, in addressing issues often framed as matters of corporate social responsibility, the shareholder primacy path does not preclude a for-profit company from taking social issues into account in the conduct of its business. What is required to stay on the path is that the company’s consideration of those social issues have a sufficient nexus to shareholder welfare and value maximization.
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Among other practical takeaways, the memo includes an instructive board-shareworthy framework (Annex - page 4) consisting of a 3 key topic-decision tree and associated considerations for boards to address when faced with specific ESG demands or issues to facilitate their decision-making compliance with the shareholder primacy framework.