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Ed. note: ESG in the News will be published tomorrow.

Last week, Responsible Investor had an interesting piece that didn’t seem to make major headlines, although I thought the story was rather important. The article looked back at how Meta positioned itself as a socially-responsible company – starting in 2019 in alignment with The Business Roundtable’s (BRT) “Statement on the purpose of a corporation” up through a statement in its 2022 proxy statement wherein the Board stated:

“We believe that protecting our community is more important than maximizing our profits, and we lead our industry in providing regular reports that track our progress and demonstrate our continued commitment to keeping our communities safe.”

Those words were tested late last year in the Delaware Court of Chancery where the company defended itself against a class action lawsuit that argued the company was putting profits ahead of social responsibilities. Meta’s Motion to Dismiss – filed just last month – stated that the company is profit driven and the law requires that the company operate in that way “to maximize long term value.” The company made clear that it is not a public benefit corporation – a status that “vitiate[s] any profit maximization duty” and “imposes a ‘mandatory, enforceable duty on the part of directors to consider the best interest interests of [all] corporate constituencies.'”

The article comes around to its point that perhaps we will not see more “stakeholderism” pressure on companies to the extent Meta faced.

“Talk of stakeholder capitalism has died down in recent years. Shareholder proposals prompted by the BRT statement have stopped being filed, without ever attracting meaningful support. Even those calling on firms to become public benefit corporations are a rarity.

There are also legitimate practical questions when it comes to stakeholderism. These are touched upon by Meta’s lawyers in the motion to dismiss when they question how feasible it is for a company to direct its decisions by ‘not only what is in the best interests of the corporation itself, but also what is in the best interest of thousands of other companies (and, indeed the global market and society as a whole).'”

Stakeholder capitalism never seemed practical or workable. I was not persuaded by BRT’s 2019 statement and remain unconvinced. But my opinion isn’t important. This coming proxy season should tell us what others believe about the future (or death) of stakeholder capitalism.

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The Editor

Lawrence Heim has been practicing in the field of ESG management for almost 40 years. He began his career as a legal assistant in the Environmental Practice of Vinson & Elkins working for a partner who is nationally recognized and an adjunct professor of environmental law at the University of Texas Law School. He moved into technical environmental consulting with ENSR Consulting & Engineering at the height of environmental regulatory development, working across a range of disciplines. He was one… View Profile