General counsel have ESG jitters even as efforts increase - Reuters

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• Most legal chiefs said they faced pressure to grow their organization's ESG efforts in the past three years
• They are divided on how to handle CEO and employee-driven activism

Sept 16 (Reuters) - Despite pressure to improve their companies' commitment to environmental, social, and governance matters, general counsel are still wary of disclosure risks and CEO and employee-driven activism that could come with ESG, according to a new report.

Over three-quarters of the participants in the survey released Thursday by the Rock Center for Corporate Governance at Stanford University said that they faced pressure, especially from employees, to grow ESG efforts in the past three years.

The survey completed earlier this year drew responses from nearly 70 general counsel and senior legal officers.

ESG is a growing priority for corporations as shareholders and employees press them to become more active on issues like racial injustice and climate change. Corporate legal departments are increasingly tasked with guiding such efforts.

General counsel respondents said their companies are most frequently pressured to increase their financial commitments to the diversity, equity, and inclusion portion of ESG. They also face lesser but considerable pressures around their companies' social impact, wages paid to lower-level employees, and environment and sustainability practices.

The report showed 72 percent of general counsel either somewhat or significantly believed that ESG investment would improve their companies' long-term financial performance.

Yet some legal chiefs are worried that disclosing their environmental, diversity, and social impact data would increase legal and regulatory risk.

Only 27 percent of the respondents, for instance, said they make Equal Employment Opportunity data that they report to the government publicly available on their websites.

General counsel are also divided on whether their CEO should take a vocal stance on issues not directly related to the company's core business.

While half of them believe CEO activism can produce reputational benefits for the organization, more than a third said they fear that it would lead the company to reputational, legal, or regulatory harm.

Similarly, general counsel appear divided on how to handle employee activism. About half of the respondents said that employee activism is a workplace-related matter that employers should actively engage with employees on, while over a third disagreed.

Despite the general trend toward ESG, stakeholder capitalism, and corporate activism, the report concluded that general counsel are wary of the uncertain long-term impact.

"It is notable that over half of the people who are

responsible for balancing the risk and reward of corporate actions advocate dialing back some of these efforts and recommitting to the central strategic and profit-making purpose," it said.

Reporting by Xiumei Dong

Xiumei Dong

Xiumei Dong covers legal industry news, with a focus on law firm strategy and growth, in-house counsel and the Washington, D.C., legal market. Reach her at Xiumei.Dong@thomsonreuters.com.

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