The X files

ESG is the big buzzword in business. Let me repeat, in business. London business paper CityAM reports that a survey finds only 13% of the general public know what ESG is.

A report from PR flacks SEC Newgate unveiled the figure, suggesting there was quite a bit of work to be done explaining things to Joe Public. As you might expect, CityAM expresses some alarm at the figure, pointing out more people claim to believe in aliens than know about ESG.

First, given the infinite size of the universe, who would bet against aliens being out there? Second, the general public doesn’t—in general—read corporate reports. That’s a special activity reserved for special people, all wearing Marks & Spencer suits. No, going by the popularity of social media, they get their news from TikTok (other social media sites are available).

So what we need is TikTokkers offering dance routines, while reciting ESG reports. We’re on it.

Going Dutch?

Speaking of ESG, debate rumbles on over efforts to force companies into accelerated carbon emissions reduction policies in the courts.

This week, Paul Davies KC, a law prof at Harris Manchester College, draws attention to efforts in UK and Dutch courts to force Shell into amending its transition plans. This worked in a Dutch court; fell on its face in the UK.

Broadly, the Dutch court ordered Shell to reduce its CO2 emissions by 45% by 2030, with the court relying on an “unwritten standard of care” in the Dutch Civil Code which means that “acting in conflict with what is generally accepted according to unwritten law is unlawful”.

In the UK, the court threw out the case because, in being asked to rule that Shell had breached its directors’ duties, it was essentially being asked to serve as a “supervisory board”, which it refused to do.

Also, the judge ruled the case was not “brought in good faith” because the claimant, ClientEarth, was likely pursuing its “own policy agenda”. ClientEarth was ordered to pay Shell’s costs when the case was thrown out.

Davies concludes his jaunt around the cases with this insight: “Whether one prefers the unpredictable, judicial hyper-activism of the Dutch court, or the refusal to engage of the English court probably depends on one’s estimate of what states are likely to do in the climate change area and whether that will be more apposite than the courts’ efforts.”

Hmmm. Bet on the courts to save the planet or bet on governments?

How many are not enough?

Japanese companies need more women on their boards. That’s the message this week from the International Corporate Governance Network (ICGN), responding to new policy initiatives launched in Tokyo earlier this year.

The Japanese government wants 30%—minimum—of executive roles occupied by women by 2030 and with at least one female executive by 2025. Only there are some issues. ICGN says it believes “the timeline should be accelerated” to come up to scratch with other countries in Asia.

But also, there’s a tricky issue over definitions. ICGN says it would be “helpful to provide a definition of ‘executive officers’ as this is unclear to investors and is open for considerable interpretation by companies”.

It’s one thing to set a target; it’s another entirely to ensure that everyone knows what it means.

Separation anxiety

Well, apparently investors in the US are getting quite worked up about separating the chair and CEO roles. Proxy advisors ISS report that the number of shareholder proposals at Russell 3000 companies requesting separation has spiked 113%.

In an article for the Harvard Law School governance blog, ISS says: “Looking at independent chair proposals over the last 10 years, we found that they receive significant investor support but almost never gain a majority.” Support averages 29%-35%.

That’s bad news for governance aficionados but says ISS despite all that independent chairs are becoming “more common”. The drivers include succession and crisis management, as well as shareholder and regulatory pressure. Looks like apprehension over independent board chairs is set to continue for some time to come.