I recently read David Webber's new article commenting on Leo Strine's approach to ESG issues and his neologism (E)ESG. I am, of course, on the opposite side of Strine and Webber on the merits of ESG. (Webber opines at 883 that "if we open the door to standards like Strine’s to 'provide more value to society'—and I believe we must open that door ....") But that is a question for another day and, frankly, for my forthcoming book The Profit Motive.
The gist of Webber's argument consists of offering up a new analogy that I found quite helpful in thinking about the problems raised by ESG and CSR:
Imagine if we stopped deciding basketball games by baskets alone. Instead, victory would be determined by a combination of baskets, rebounds, steals, and fouls. Each of these is universally acknowledged as a critical component of the game. Why not reward them directly instead of indirectly, by their connection to baskets alone? Don’t we track steals and award rebounding titles? As to fouls, we use foul shots to convert their value into the only outcome of interest. But don’t fouls also have an ethical dimension, one concealed by basket-scoring primacy? ...
The response to my hypothetical basketball reform is straightforward. Even if these alternative metrics have some merit, even if scoring all would provide a richer picture of what occurred on (and off) the court, their inclusion would destroy the game. Almost any single, simple metric would be preferable to more than one. Multiple metrics would undermine consensus about who won, and even a combined weighted metric might trigger endless debates not about the outcome but about the weights. The latter would let fans leave the arena or shut off their televisions either unsure of who won or agreeing to disagree about who did. No more last-second buzzer beaters, no more highs and lows of decisive victory, just endless disputes. Playoffs would become debate tournaments, a prospect that appeals to no one except lawyers. There could never be an undisputed scoring champion like a Michael Jordan, or at least not one without an asterisk, “*baskets only.” The joy of the game is increased, its energy concentrated and intensified by its ability to produce these winners and losers, to create an absolute and universally agreed hierarchy—league tables—to do so within fixed timeframes—quarters—that have a clear beginning and end, enabling victors to be declared and the season to restart, a fresh chance for losers to become winners and vice versa. To give up all that, even in exchange for greater fairness or accuracy, would not be worth the sacrifice.
Two points to be made: (1) It is the mark of a true scholar to come up with an argument that cuts against adopting his normative priors as the pertinent legal standard. Kudos. (2) While it is the case that others have made the argument that fiduciary duty rules that require directors to consider the interests of multiple stakeholders would be unworkable, including yours truly, Webber makes the argument more clearly and effectively than anyone. This is, IMHO, a brilliant analogy.
This is a MUST read for anybody interested in ESG and CSR.
Webber, David H., The Humanities Strike Back: (E)ESG and Justice Strine Challenge Gamer Shareholder Primacy (October 1, 2022). University of Pennsylvania Journal of Business Law, Vol. 24, No. 4, 2021-22, Available at SSRN: https://ssrn.com/abstract=4250457
