A New Direction for Shareholder Environmental Activism: The Aftermath of Caremark
21 Pages Posted: 13 Mar 2008 Last revised: 30 Jul 2015
Traditionally, shareholders seeking to encourage more environmentally-friendly corporate governance have pursued one of two strategies. First, some shareholders have sought to nominate environmentally-sensitive directors to corporate boards. Second, shareholders have initiated shareholder resolutions regarding environmental practices. In some limited sense, these efforts have had positive results, raising environmental awareness in the corporate governance community. However, from a purely tactical legal perspective, they have faced severe impediments. Existing corporate law disfavors insurgent board candidates in director elections; and even where successfully elected, an environmentally friendly director may be unable to alter corporate policy due to board structures preventing wholesale change in a single election cycle (such as staggered boards) or fiduciary obligations which bar directors from serving special interests exclusively. Similarly, shareholder resolutions concerning environmental protection are often excludable from a corporation's definitive proxy solicitation as ordinary business or beyond the power of the corporation to effectuate under applicable SEC rules. Even where a shareholder resolution is included in a corporation's proxy solicitation, or where a resolution's proponents bear the cost of financing a proxy campaign on their own, such resolutions are rarely adopted and may have limited practical effect.
This Essay, a contribution to a Corporate Governance and Environmental Best Practices Symposium held at William & Mary in February 2006, attempted to flesh out an alternative strategy for environmental activists based on the Delaware Chancery Court's decision in Caremark. The Article details the legal burdens, benefits, and strategies available to environmental activists in a post-Caremark setting.
Keywords: Caremark, Fiduciary Duty, Environmental Protection, Corporate Responsibility
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