The New Separation of Ownership and Control: Institutional Investors and ESG

30 Pages Posted: 23 Mar 2021 Last revised: 2 Apr 2021

See all articles by Paul G. Mahoney

Paul G. Mahoney

University of Virginia School of Law

Julia D. Mahoney

University of Virginia School of Law

Date Written: March 22, 2021

Abstract

Scholars and policy makers have long debated whether corporations should serve social purposes at the expense of shareholder wealth. The SEC has recently been drawn into the debate as it faces calls to mandate environmental, social, and governance (ESG) disclosures. This Article urges the SEC to proceed with caution. The adoption of ESG disclosure mandates in order to serve environmental or social goals is not well-aligned with the SEC’s stated mission of protecting Main Street investors and maintaining fair, orderly, and efficient markets. Accordingly, the SEC should decline to act absent a showing that ESG disclosures will serve the financial interests of the households for whom institutional investors are fiduciaries and whose retirement and other savings they manage.

Keywords: ESG, retail investors, institutional investors, securities regulation, disclosure, investments, ESG ratings, sustainability, CSR, SRI, corporate social responsibility, socially responsible investment

JEL Classification: D14, D62, G11, G23, G38, H75, K22

Suggested Citation

Mahoney, Paul G. and Mahoney, Julia D., The New Separation of Ownership and Control: Institutional Investors and ESG (March 22, 2021). Columbia Business Law Review, Forthcoming, Virginia Law and Economics Research Paper No. 2021-09, Virginia Public Law and Legal Theory Research Paper No. 2021-18, Available at SSRN: https://ssrn.com/abstract=3809914

Paul G. Mahoney (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States
434-924-7121 (Phone)
434-924-7536 (Fax)

Julia D. Mahoney

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States
434-924-3942 (Phone)

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