COLIN MAYER, University of Oxford - Said Business School, Centre for Economic Policy Research (CEPR), European Corporate Governance Institute (ECGI)
Email: colin.mayer@sbs.ox.ac.uk

This paper was written for a Festschrift in honour of Rolf Skog.

Concepts of corporate purpose which have risen to the fore recently emphasize a point which Rolf Skog highlights in his writings about the importance of profits for the success and continuity of business. But they also question conventional notions of profits where they are earned at the expense of other parties and the methods by which we both measure profits and incentivize people to pursue them.

That leads to issues about the governance of corporate purpose which recognizes profit as being derivative of solving, not producing problems, and measurement that needs to account for the costs of rectifying and avoiding producing problems. In this context, governance moves away from a focus on the agency problem of aligning managerial interests with those of their shareholders to one that seeks to promote the identification and implementation of corporate purposes.

The role of the board is then predominantly to oversee the determination of the corporate purpose, ensure that it is the overarching framework within which strategy is formulated, and establish an internal culture, measurement and incentive system that aligns corporate values and metrics with the delivery of purpose. The measurement and incentive systems relate not just to inputs and outputs of the firm in a conventional sense but the outcomes and impacts that they have on those whom the company both affects and depends.

The transition of governance and measurement described in this paper is well underway at both national and international levels. There is much work to be done before a new governance and measurement framework emerges but there is little doubt that we are now witnessing a profound shift in the nature of the corporate system.

GEORGE S. GEORGIEV, Emory University School of Law
Email: george.georgiev@emory.edu

The SEC released its long-awaited Climate Disclosure Proposal on March 21, 2022. The Proposal is expansive, the stakes are high, and, predictably, various critical arguments are being advanced in preparation for a potential court challenge. A close review of the Proposal, however, suggests that it is firmly grounded within the traditional SEC disclosure framework that has been in place for close to nine decades. The Proposal is certainly ambitious (and overdue), but it is by no means extraordinary. This, in turn, suggests that challenges to the Proposal’s legitimacy ought to fail, even if certain aspects of the Proposal could stand to be improved as part of the ongoing rulemaking process.

This Essay makes the case that the SEC’s Climate Disclosure Proposal is in keeping with longstanding regulatory practice by highlighting several features of the traditional disclosure regime and the new Proposal. I focus my analysis on arguments I’ve developed in prior research, arguments discussed in forthcoming work, and the particular aspects of the new Proposal. This Essay is not intended to be comprehensive, and it should be noted that the broader issue of ESG disclosure has generated extensive debate and much insightful analysis.

MARTIN GELTER, Fordham University School of Law, European Corporate Governance Institute (ECGI)
Email: mgelter@law.fordham.edu

During the past decades, corporate law and corporate governance debates have generally been skeptical of elements of economic ‘Nationalism’ or ‘protectionism.’ Arguably, globalization and convergence in corporate governance have resulted in a reduction of protectionist policies. However, recently COVID-19 has resulted in nationalist and protectionist conduct in economic policy across jurisdictions. Contrary to the predominant view, this paper argues that corporate governance policies intended to serve a particular country’s interest may at times be justified. First, globalization and convergence in corporate governance are likely to have beneficial effects only when outside investors pursue financial rather than political goals. Protectionist policies may protect domestic firms from external competition of this type, e.g., from being taken over by foreign firms controlled by or having heavy backing from their government. Second, some degree of protectionism may be necessary to sustain a country’s institutional arrangements and economic prosperity. Significant outside financial investors or multinational groups may not interact with domestic constituencies in the same way as the existing ones, thus disrupting the social compact. This may be necessary to preserve the balance of the political economy in a country that has allowed it to maintain productivity in the past. In addition, preserving a particular economic arrangement is often necessary to protect political stability, which is a precondition to productive efficiency. Third, COVID-19 has highlighted the need for resilient structures in corporate governance, which may include integration into a domestic economic network. Protectionist policy may serve the purpose of protecting the viability of industry in times of political crisis, e.g., by protecting supply chains. Moreover, being integrated into a national network often helps firms weather crises even if such embeddedness is not aligned with efficiency goals as usually understood in corporate governance debates.

ALPEREN GÖZLÜGÖL, Leibniz Institute for Financial Research SAFE
Email: gozlugol@safe-frankfurt.de
WOLF-GEORG RINGE, University of Hamburg - Institute of Law & Economics, University of Oxford - Faculty of Law, European Corporate Governance Institute (ECGI)
Email: georg.ringe@uni-hamburg.de

Global consensus is growing on the contribution that corporations and finance must make towards the net-zero transition in line with the Paris Agreement goals. However, most efforts in legislative instruments as well as shareholder or stakeholder initiatives have ultimately focused on public companies: for example, most disclosure obligations result from the given company’s status of being listed on a stock exchange.
This article argues that such a focus falls short of providing a comprehensive approach to the problem of climate change. In doing so, it examines the contribution of private companies to climate change, the relevance of climate risks for them, as well as the phenomenon of brown-spinning. We show that one cannot afford to ignore private companies in the net-zero transition and climate change adaptation. Yet, private companies lack several disciplining mechanisms available to public companies such as institutional investor engagement, certain corporate governance arrangements, and transparency through regular disclosure obligations. At this stage, only some generic regulatory instruments such as carbon pricing and environmental regulation apply to them. The article closes with a discussion of the main policy implications. Prima