The rising cost of living along with the energy, climate change, water, pollution and other crises are all bearing down on people and the communities they live in. As pressure increases, it brings to the surface questions about real sustainability leadership and how best to have regard to stakeholder interests. Decisions taken by boards are more and more being assessed through the demanding lens of what they mean for all stakeholders. This in turns asks what balance must be struck between the interests of shareholders and others affected by or reliant on that business, including (in the language of directors’ duties) “the interests of the company’s employees … [and] the impact of the company’s operations on the community and the environment”.
Given the vital role businesses must play to address these issues, we ask in our briefing A Bridge to Better Business: the Positive Case for Updating Directors’ Duties whether directors’ duties give the proper foundation needed to allow companies to respond in the way society increasingly expects and the climate and other emergencies demand - as there can be no doubt that some boards have faced and will continue to face some very difficult decisions concerning investment and capital allocation, shareholder returns and the interests of consumers.
Significant change is needed to the way business interacts with and addresses the greatest challenges facing people and planet. The Better Business Act and other initiatives considered in our briefing do not provide a complete answer, but a proposition for a necessary refocus. Jeff Twentyman and George Murray suggest now is the right time to examine the positive case for how directors’ duties could strike a different balance between shareholder and stakeholder interests fit for our times.
A Bridge to Better Business: the Positive Case for Updating Directors’ Duties can be read here. The article reflects the views of the writers and not Slaughter and May, and is published to provide general information and not as legal advice.