Report on Tables 11 and 12 of Interactive Workshop: Selected corporate topics connected to developments and consequences of the global pandemic – part one

Monday 27 June 2022

Report on session at 6th IBA Global Entrepreneurship Conference, 16 – 17 May 2022, presented by the IBA Closely Held and Growing Business Enterprise Committee

Rappoteurs and moderators for tables 11 and 12

Alessandra Nascimento S F Mourão, Nascimento Mourão, São Paulo

Tom Ensink Ploum, Rotterdam

Session Chair and Co-Chair

Noreen R Weiss MacDonald Weiss, New York; Treasurer, IBA Closely Held and Growing Business Enterprises Committee

Ralf Morshäuser Gleiss Lutz, Munich; Education Officer, IBA Corporate and M&A Law Committee

Ethics, diversity and social responsibility: do corporate directors have a duty to shareholders, or are they permitted to look beyond to other stakeholders in the business?

Tables 11 and 12 were merged. Participating jurisdictions to the tables were Brazil, Canada, Croatia, Malta, the Netherlands and the United Kingdom.

The discussion had a broad scope, with all participants exchanging views and brainstorming on the topic. The most important issues are discussed below.

There was consensus at the table on there being a more extended responsibility on social, ethic and environmental, social and governance (ESG) topics in general. Directors do not have only duties to shareholders.

ESG is here and is here to stay. The subject is taken very seriously by legislators, companies and institutional investors and is meanwhile widely applied.

ESG is not a matter for large companies only. Smaller start ups should be made aware to follow ESG principles from the start. Not only because they need to do so if they (want to) grow into big companies, but also because they might be induced to do so by (big) suppliers. For example, in Brazil which is traditionally a country with large resources, Brazilian companies are held by their clients and suppliers to follow ESG principles.

The legal answer to the question above may differ depending on size and status of the organisation. ESG is becoming a regulatory obligation in some jurisdictions. This gives a valid reason to look beyond the mere interests of the shareholders. Regulation may be the key to encourage the shift to include other stakeholders in the equation. And sometimes regulation comes after business demands or pressure from the stakeholders themselves.

The group discussed a particular case regarding the clash of shareholders generations in an old family-owned company, which took into account other values besides profit. The group discussed the case in which older generations and younger generations had different views on a company’s history in using forced labour in the previous century.

Lawyers sometimes, and maybe now more than ever, are demanded not only to provide legal perspectives of the problem to be solved, but also to give an ethical advice to the clients due to the reputational consequences of management or board decisions.