Forcing ESG: From holding CEOs accountable to mandating women on boards, some policymakers want to mandate that corporations do good.

• Author: Milford, Maureen
• Position: THE CHARACTER OF THE CORPORATION: Long-Term Thinking

For the first time since the Great Depression, companies are vulnerable to a range of proposed legislation that attempts to rein in what some believe are freewheeling behaviors allowed under the shareholder-comes-first model.

The growing number of initiatives that fall under the ESG umbrella of environmental, social and corporate governance issues shows a willingness among some policymakers to force companies and their directors to consider society's larger goals. What's more, there seems to be an increased appetite for punishing companies that fail to weigh the impact of their decisions on more than just maximizing shareholder value.

"People are less and less willing to give the corporate sector a pass," says Robert Hockett, a professor at Cornell Law School who helped develop two ESG-related pieces of legislation introduced in the last session of Congress, including the Accountable Capitalism Act (ACA) and Stop WALMART Act.

Before long, boards could find themselves navigating an even more complex terrain of state, federal and international ESG laws and rules that will require directors to examine how their behaviors affect a wide-ranging group of constituencies or so-called stakeholders, such as employees, customers, suppliers and communities.

Is it a watershed moment when it comes to forcing companies to consider other stakeholders?

Matteo Tonello, managing director of ESG research at The Conference Board, seems to think so. It's a tipping point, he explains, "in the transition from the notion of the corporation as a vehicle that exclusively pursues shareholder value growth to the more sophisticated notion where the company is a nexus of key stakeholder relations that cannot be neglected without impairing the shareholder value growth objective."

The most dramatic federal ESG bills are proposals that call for significant corporate reform measures impacting the internal workings of companies.

The two notable initiatives--ACA and Stop WALMART Act--provide a reference guide for what reformers are envisioning. Although they were erased from the books when the 115th Congress adjourned in January, the offices of the lawmakers who introduced the legislation indicate similar initiatives will be revived in the current Congress.

Already this year, U.S. Sen. Elizabeth Warren, a democrat from Massachusetts, has introduced the Corporate Executive Accountability Act seeking to ease the path for sending executives of large corporations to jail when...