ESG in the Boardroom: A Guidebook for Directors.

• Author: Brownstein, Howard Brod

Board members have been inundated for the past several years with demands for them to be attentive to ESG considerations. However, precious little has been written about how this should actually work in the boardroom. What specific actions should board members take, and how do ESG considerations fit in with the basic fiduciary duty of board members to maximize enterprise value?

There is too often an automatic assumption that any pursuit of ESG goals must come at the expense of shareholder value. However, this viewpoint is overly simplistic as well as shortsighted, since ESG issues are here to stay and will likely only expand.

The American Bar Association (ABA) has stepped up to meet the important need for board members to better understand ESG with the publication of ESG in the Boardroom: A Guidebook for Directors. The ABA's Business Law Section includes its Corporate Governance Committee (CGC), which is a community of attorneys who regularly advise boards and their members on fulfillment of their fiduciary duties. Prominent CGC members Katayun I. Jaffari, chair of the corporate governance practice at law firm Cozen O'Connor in Philadelphia, and Stephen A. Pike, coleader of the Canadian ESG advisory services practice at law firm Gowling WLG in Toronto, are the editors of ESG in the Boardroom. Many of the book's chapters are written by current or past leaders of the CGC.

ESG requires board members to understand both its intrinsic and extrinsic considerations, and this valuable book covers both. Intrinsically, board members may believe that embracing ESG considerations will contribute directly to the company's financial well-being, at least in the long term if not also the short term. However, extrinsically, it's important for board members to bear in mind that there are stakeholders other than the company's shareholders whose views of the company are important to maintaining and increasing enterprise value. These include the company's customers, vendors, employees and the communities where the company is present and active. Disregarding the viewpoints of these constituencies can create serious reputational and other risks for the company. Therefore, boards must take those viewpoints into account. In those relatively rare cases where such stakeholder interests might appear to be at odds with short- or long-term profitability, this conflict must be actively addressed.

As its title promises, ESG in the Boardroom provides a step-by-step...