Fiduciary Duties and Corporate Climate Responsibility.

Abstract

I remain intrigued with the benefits as well as the costs of agency relationships and in particular the possible power of fiduciary duties to be harnessed to advance the firm's social responsibilities. That is, can internal mechanisms of the firm, the private law (from a European perspective) fiduciary duties of agents, be used to advance external public law goals? Instead of outward standards of responsibility being brought into the firm through external mechanisms (i.e., voluntary standards development and third-party assurance), could the internal standards of agents' responsibilities to the firm, their fiduciary duties, be used to extend responsible action beyond the firm and through that mechanism actuate what many are calling for as the firm's social responsibilities? In this paper, I take up this question by reference to a public law issue much in focus today, that of climate change. In Part I, I provide an extremely brief overview of the understanding of climate risk as a financial risk, connecting that overview to the question of why private law fiduciary duties might be engaged to address that risk. In Part II, I summarize the familiar territory of directors' and officers' fiduciary obligations, using Delaware law as the exemplar, and in Part III, I describe a more ambitious approach to directors' fiduciary obligations, a new idea by the Dutch academic and practitioner Jaap Winter of directors having "societal duties." In Part IV, concentrating on Delaware law, I develop some of the implications of these duties for directors' and officers' obligations to include climate change in their oversight, strategic direction of the company, and possible disclosure. Part V connects these discussions back to the question with which I began, that is, could the fiduciary duties of officers and directors be engaged to securely ground the company's duties to society generally, beyond climate change? I then briefly conclude the article.