The General Counsel View of ESG Risk

15 Pages Posted: 15 Sep 2021

See all articles by Michael Callahan

Michael Callahan

Stanford Law School

David F. Larcker

Stanford University - Graduate School of Business; European Corporate Governance Institute (ECGI); Stanford University - Arthur & Toni Rembe Rock Center for Corporate Governance

Brian Tayan

Stanford University - Graduate School of Business

Date Written: September 14, 2021

Abstract

In this Closer Look, we examine the General Counsel perspective of Environmental, Social, and Governance (ESG) matters. General Counsel offer an interesting perspective because they are charged with advising boards and companies on operating between the guardrails of risk-informed and responsible decision making.

We find that General Counsel, on average, support ESG-related activities but harbor significant concern for the legal and regulatory risk of these activities. General Counsel also express notable concern about the potential liability from disclosure of ESG-related activities, and the reputational and productivity costs caused by CEO and employee-driven activism.

We ask:
• What impacts do ESG initiatives have on long-term performance and risk?
• Can companies find a balance between “doing good” and not causing unexpected damage?
• How effective are companies at defining the boundaries of their ESG initiatives?
• How much information should companies disclose about their ESG initiatives?
• Can a company clearly, concisely, and meaningfully disclose relevant data about these activities?

Keywords: Corporate governance, ESG, environmental, social, governance, general counsel, risk, litigation risk, disclosure, regulatory risk, CEO activism, employee activism, board of directors, survey, corporate governance research

Suggested Citation

Callahan, Michael and Larcker, David F. and Tayan, Brian, The General Counsel View of ESG Risk (September 14, 2021). Rock Center for Corporate Governance at Stanford University Working Paper, Available at SSRN: https://ssrn.com/abstract=3923913

Michael Callahan (Contact Author)

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305
United States

David F. Larcker

Stanford University - Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Stanford University - Arthur & Toni Rembe Rock Center for Corporate Governance ( email )

Crown Quadrangle 559 Nathan Ab
Stanford, CA 94305-8610
United States

Brian Tayan

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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