Don’t Compound the Caremark Mistake by Extending It to ESG Oversight

The question addressed in this article is whether the board’s Caremark obligations should be extended to encompass oversight of corporate performance with environmental, social, and governance (ESG) issues. In other words, should the board face potential liability not just for failing to ensure that the company has adequate reporting and monitoring systems in place to ensure compliance with ESG-related legal requirements, but also to monitor ESG risks in areas where corporate compliance would be voluntary or aspirational. The article concludes that Caremark should not be so extended.

Stephen M. Bainbridge