Caremark and ESG, Perfect Together: A Practical Approach to Implementing an Integrated, Effi cient, and Effective Caremark and EESG Strategy

Date01 August 2022
AuthorLeo E. Strine, Jr., Kirby M. Smith, Reilly S. Steel
by Leo E. Strine, Jr., Kirby M. Smith, and Reilly S. Steel
Leo E. Strine, Jr., is the Michael L. Wachter Distinguished Fellow in Law and Policy at the University
of Pennsylvania Carey Law School; Senior Fellow, Harvard Program on Corporate Governance;
Henry Crown Fellow, Aspen Institute; Of Counsel, Wachtell Lipton Rosen & Katz; and former Chief
Justice and Chancellor of the State of Delaware. Kirby M. Smith is a Member with Bridgeport
Partners LP. Reilly S. Steel is a Ph.D. Student in the Department of Politics, Princeton University.
I. Introduction
With concerns about climate change, growing economic
insecurity and inequa lity, and the resiliency of critical
supply chai ns has come renewed conc ern about whether
business entities conduct themselves in a manner that is
consistent with society’s best interests. is concern mani-
fests in a demand that corporations respect the best inter-
ests of society and all corporate stakeholders, not solely
stockholders.¹ e buzz abbreviation for this is “environ-
mental, social, and governance” (ESG), or as one of us has
called it, “EESG.”²
Many corporate duciaries believe that companies are
most likely to create sustainable prots if they act fairly
Editors’ Note: This Article is adapted from Leo E. Strine Jr.,
Kirby M. Smith, and Reilly S. Steel, Caremark and ESG, Per-
fect Together: A Practical Approach to Implementing an In-
tegrated, Efficient, and Effective Caremark and EESG, 106
IOWA L. REV. 18853 (2021), and used with permission.
1. See infra Part III.
2. e extra “E” is for employees—a crucial but oftentimes missing compo-
nent in the ESG discussion. See Leo E. Strine Jr., Toward Fair and Sus-
tainable Capitalism 6 (Roosevelt Inst., Working Paper No. 202008, 2020),
SustainableCapitalism_WorkingPaper_202008.pdf [
toward their employees, customers, creditors, the envi-
ronment, and the communities the company’s operations
aect.³ However, boards and management teams struggle
to situate EESG within existing reporting and committee
frameworks and gure out how to meet the demand for
greater accountability to society while not falling short in
other areas.
Here, we propose a way of thinking about EESG that
promotes ethical, fair, and sustainable behavior without
heaping additional work on already-stretched employees
and directors. To develop the framework for this proposal,
we relate the concept of EESG to the preexisting compli-
ance duty of corporations. is long-standing duty, asso-
ciated with the Delaware Court of Cha ncery’s landmark
decision in In re Caremark International Inc. Derivative
Litigation but rooted in the much older requirement
that corporations conduct only lawful business by lawful
means, overlaps with and should be integrated into com-
panies’ decisions to hold themselves to even higher levels
of responsibility.
is Article proceed s in three parts. Part II observes t hat
corporate law’s rst principle is that a corporation must
3. See, e.g., John D. Morley, Too Big to Be Activist, 92 S. C. L. R. 1407,
1409 (2019); Larry Fink, Larry Fink’s 2018 Letter to CEOs: A Sense of
Purpose, BR,
relations/2018-larry-nk-ceo-letter [] (“To
prosper over time, every company must not only deliver nancial perfor-
mance, but also show how it makes a positive contribution to society.”).
4. In re Caremark Int’l Inc. Derivative Litig., 698 A.2d 959 (Del. Ch. 1996).
5. Leo E. Strine Jr. et al., Loyalty’s Core Demand: e Dening Role of Good
Faith in Corporation Law, 98 G. L. R. 629, 649-51 (2010).
Authors’ Note: The authors are grateful to Xavier Briggs,
Jeff Gordon, Amelia Miazad, Elizabeth Pollman, and Eric
Talley for their insightful comments.
Copyright © 2022 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®,, 1-800-433-5120.

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