ESG, Corporate Governance & Future of the Firm

In new research, Michele Fioretti, Victor Saint-Jean, and Simon Smith show that NGO activism follows a clear economic logic: when NGOs lack visibility, stakeholders do not view them as credible, forcing them to rely on high-profile campaigns during annual shareholder meetings. However, these actions generate attention but rarely influence decisions. As NGOs gain recognition, they can campaign earlier, when votes are still open, and meaningfully sway shareholders and change corporate behavior.

In new research, Anat R. Admati, Nate Atkinson, and Paul Pfleiderer argue that when misconduct is profitable, enforcement mechanisms aimed at deterring corporate misconduct often fail to achieve their goals and they may even backfire. The reason is that corporations can adjust internal governance mechanisms, particularly managerial compensation, to reduce or nullify the deterrent effects of corporate or managerial sanctions. These responses may lead to more misconduct and exacerbate social harm.

The following is an adapted excerpt from “To Protect Their Interests: The Invention and Exploitation of Corporate Bankruptcy" by Stephen J. Lubben, now out at Columbia University Press. 

In new research, Vikas Agarwal, Juan-Pedro Gómez, Kasra Hosseini, and Manish Jha explore how companies reward executives for meeting sustainability targets. They evaluate how ESG metrics to determine executive pay create tradeoffs with traditional financial incentives, and what that means for the future of ESG goals.

ProMarket Managing Editor Andy Shi reviews the controversy behind ExxonMobil’s new voting program and how it falls into the broader debates over recent developments to shareholder democracy and corporate governance.

Corporate crimes like fraud continue unabated in the United States. Jennifer Taub defines a chief reason as “accountability theater,” or the propensity of government prosecutors to pursue out-of-court civil settlements rather than criminal trials that, though they might lose them, would publicize the extent of corporate misconduct and better deter future abuse.

Some have argued that environmental, social, and governance (ESG) ratings are generally more reliable than credit ratings due to how the raters are paid for their work. In new research, Suhas Sridharan and coauthors find that significant conflicts of interest can arise for ESG raters when they also provide ESG index funds to investors.

Corporations can sidestep prosecution by cooperating with the government and offering up employees to avoid their own criminal liability. Ellen S. Podgor discusses two prominent reasons why the current approach to corporate criminality is inefficient.

Christina M. Sautter writes that the passage of Senate Bill 21, which rebalances power away from shareholders to corporate management, represents a 150-year-long development in corporate law spurred by regulatory capture that has removed countless restrictions on firm behavior.

Why is nonprofit ownership gaining traction in the U.S., with companies like OpenAI and Patagonia mirroring long-standing models in Europe, such as Novo Nordisk and IKEA? In new research, Ofer Eldar and Mark Ørberg unpack the economic rationales behind nonprofit business ownership, challenge the idea that it’s all about purpose, and highlight the overlooked risks of nonprofit control.