Kristen Sullivan is Partner of Sustainability and KPI Services at Deloitte & Touche LLP, Amy Silverstein is Senior Manager and Purpose Strategy Lead at the Monitor Institute, Deloitte LLP, and Leeann Galezio Arthur is Senior Manager at the Center for Board Effectiveness, Deloitte & Touche LLP. This post is based on a Deloitte memorandum by Ms. Sullivan, Ms. Silverstein, Ms. Arthur, Maureen Bujno, and Bob Lamm. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here); Socially Responsible Firms by Alan Ferrell, Hao Liang, and Luc Renneboog (discussed on the Forum here).
Even before the world was disrupted by COVID-19 and current events calling for a greater focus on social justice, corporate America was already at an inflection point with respect to its role in society, facing louder and more widespread calls for businesses to consider a broader range of stakeholders. From the groundswell of support for shareholder proposals on environmental and social matters starting in 2017, to the August 2019 statement of the Business Roundtable, to continuing pressure from prominent members of the investment community, the conversation on the purpose of the corporation has continued to gain momentum. While it remains to be seen whether we are witnessing a permanent transition from the primacy of shareholder capitalism to the inclusion of stakeholder capitalism, the above and other developments have had a profound impact on the corporate community’s approach to environmental, social, and governance (ESG) issues. In addition to increasing demands of primary stakeholders, defining and integrating corporate purpose and ESG objectives will require companies to evaluate a wide range of decisions through a multistakeholder lens, leading corporations to prioritize groups that once might have been viewed as nontraditional or secondary stakeholders: employees, customers, suppliers, communities, and other affiliations.
Comment Letter on Control Shares Statutes and Registered Investment Companies
More from: Phillip Goldstein, Bulldog Investors
Phillip Goldstein is the co-founder of Bulldog Investors. This post is based on his letter to the SEC Division of Investment Management. Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here); and The Myth that Insulating Boards Serves Long-Term Value by Lucian Bebchuk (discussed on the Forum here).
Once upon a time, investment companies (“funds”) were only subject to the laws of the state in which they were registered. In a report to Congress, the SEC identified a number of abuses and evils, including funds taking advantage of lax state laws to issue securities with inequitable or discriminatory provisions.
After extensive hearings, Congress concluded that the individual states had failed to protect investors from the sort of abuses the SEC had documented. (Section 1(a)(5).) Consequently, Congress adopted the Investment Company Act of 1940 (the “ICA”). Unlike other federal securities laws that focused on disclosure and fraud, the ICA required funds to adopt certain governance practices and prohibited others. Commissioner Robert E. Healy and Chief Counsel David Schenker [2] were the primary architects of what was to become the ICA. In a prepared statement to the Senate Subcommittee on Banking and Currency on April 2, 1940, Commissioner Healy said this:
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