Insurance Law Commons^™

A Different Approach To Agency Theory And Implications For Esg, Jonathan Bonham, Amoray Riggs-Cragun

Seattle University Law Review

In conventional agency theory, the agent is modeled as exerting unobservable “effort” that influences the distribution over outcomes the principal cares about. Recent papers instead allow the agent to choose the entire distribution, an assumption that better describes the extensive and flexible control that CEOs have over firm outcomes. Under this assumption, the optimal contract rewards the agent directly for outcomes the principal cares about, rather than for what those outcomes reveal about the agent’s effort. This article briefly summarizes this new agency model and discusses its implications for contracting on ESG activities.

The Esg Information System, Stavros Gadinis, Amelia Miazad

Seattle University Law Review

The mounting focus on ESG has forced internal corporate decision-making into the spotlight. Investors are eager to support companies in innovative “green” technologies and scrutinize companies’ transition plans. Activists are targeting boards whose decisions appear too timid or insufficiently explained. Consumers and employees are incorporating companies sustainability credentials in their purchasing and employment decisions. These actors are asking companies for better information, higher quality reports, and granular data. In response, companies are producing lengthy sustainability reports, adopting ambitious purpose statements, and touting their sustainability credentials. Understandably, concerns about greenwashing and accountability abound, and policymakers are preparing for action.

In this …

Caremark'S Butterfly Effect, Angela N. Aneiros, Karen E. Woody

Scholarly Articles

In 1996, the Delaware Court of Chancery detailed the minimum standard for corporate boards of directors (“board”) with regard to corporate compliance programs and monitoring protocols. The landmark Caremark decision held that directors would not face liability for a breach of fiduciary duties unless they failed to implement a system of controls and compliance, or knowingly failed to monitor that system. In order to bring a successful Caremark claim, plaintiffs must prove that the board operated in bad faith by failing to exercise oversight in a sustained or systemic way. The Delaware Court of Chancery opinion noted that the theory …