Environmental, Social, and Governance Programs Take Center Stage for Businesses

In a recent blog posting on the Wisconsin State Bar Business Law Section blog, I wrote the following about Environmental, Social, and Governance (ESG) programs:

In connection with ExxonMobil’s annual meeting held on May 26, 2021, three dissident directors nominated by hedge fund Engine No. 1 were elected to ExxonMobil’s board, beating out the incumbents.

Engine No. 1 had proposed the director nominees (along with one other) to help lead ExxonMobil to long-term shareholder value creation, including through “net-zero emissions energy sources and clean energy infrastructure.”[1]

The fact that these dissident directors won the election over the incumbents indicates the increasingly broad shareholder support for clean energy to reduce climate change.

ExxonMobil is not alone in facing an investor challenge to its strategy in favor of a more carbon-neutral strategy. . . . 

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Reflections on Judicial Contract Interpretation and the Boden Lecture

agreement-signingThis week in my Contracts class we are discussing how to interpret a contract — that is, how to give contractual language meaning. This discussion inevitably focuses on how courts interpret contracts, because Contracts casebooks primarily examine principles of contract through case law. Cases do, in fact, provide a useful lens through which to study contract interpretation, for they allow an examination of courts’ goals and tools in approaching conflicting arguments about how to interpret an ambiguous term. Yet we also considered judicial interpretation of contracts from a policy perspective.

Specifically, in light of Professor Robert Scott’s Boden lecture “Contracts Design and the Goldilocks Problem,” I asked my Contracts students to reflect on the wisdom of judicial determination of the meaning of ambiguous contractual language.

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Shareholder “Say on Pay” – Can it Expose Directors to Liability?

[Editor’s Note: Over the past month, faculty members have been posting on upcoming judicial decisions of particular interest. This is the fourth post in the series.]

In January of 2011, the Securities and Exchange Commission, as part of its implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, began requiring U.S. public companies to provide their shareholders with a non-binding vote on the compensation of certain executive officers. This “say on pay” gives shareholders an advisory say on the amount of compensation paid to those executives. Related disclosure is also designed to prompt the board to consider how the “say on pay” vote affects its broader executive compensation policies and practices.

The Dodd-Frank Act specifically provides that the shareholder say-on-pay vote is not intended to affect directors’ fiduciary duties. Despite this, in at least two cases, shareholders have sued directors for breaches of their fiduciary duties, primarily on the basis that they implemented compensation practices that shareholder had voted against.

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