Fiduciary Duty Revisited
In “Reclaiming Fiduciary Duty Balance,” James Hawley, Keith Johnson, and Ed Waitzer maintain that narrow interpretations of fiduciary duty have “generated myopic investment herding behaviors” and caused fiduciaries to focus increasingly on their short-term liabilities at the expense of longer-term ones. Institutional fund trustees, the paper argues, cannot meet those longer-term obligations unless they have access to information on the full range of ESG risks for the companies in which they invest. The sorry state of ESG corporate reporting suggests that they do not have such access now. If fund trustees begin to exercise this fiduciary responsibility in earnest, the impact on public company reporting will be immense. Institutional funds collectively own 73% of the stocks issued by Fortune 1000 companies.
In their paper, “The Role of the Board in Accelerating the Adoption of Integrated Reporting,” Robert G. Eccles and George Serafeim make a similar argument to Hawley et al’s. They assert that it is the fiduciary responsibility of a corporate board to support “an organization in addressing…the material issues affecting its ability to create and sustain value in the short, medium, and longer term.” Eccles and Serafeim call on boards to support the integrated reporting of corporations’ financial and nonfinancial information, claiming that sustainable value creation cannot take place without it.