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New shareholder resolution and legal strategy to be unveiled at RI New York conference

RI will be hosting discussions on corporate director fiduciary duty in the US at its New York conference this week. Keith Johnson and Tiffany Reeves explain more.

A Bridge between Investor and Corporate Perspectives

Challenges encountered by long-term investors have multiplied in 2019.  The US Securities and Exchange Commission proposed regulations that could drastically limit shareholder voices. 

Business Roundtable CEOs endorsed a stakeholder view of corporate governance, leaving some shareholders concerned that company management would become answerable to no one. Corporate advocacy groups amplified their attacks on shareholder efforts to bring attention to sustainability risks. 

Even the Principles for Responsible Investment (PRI) concluded that investor stewardship, as it’s currently practiced, is myopic and not working well, announcing a complete stewardship rethink initiative.

While debates on these issues seem to consume all available oxygen, there is a less traveled bridge joining long-term investors and companies.  That bridge has been identified in recent research, endorsed in Delaware corporate law and referenced by numerous investor organisations.  

The RI New York conference panel on Corporate Governance, Reputational Risk and Why ESG Matters is set to discuss a new roadmap across that bridge.

Long-Term Strategic Planning Links Investor and Company Interests

Companies that operate under a long-term strategic plan which extends beyond the current three- to five-year scenarios used by the vast majority of companies were found in a recent study published in the Harvard Business review to consistently outperform their peers across almost every financial measure that matters and deliver higher shareholder returns over the long term.  However, corporate managers face investor pressure to focus on short-term returns. 

Lack of consistent and usable disclosure of information on sustainability issues by companies impedes investors’ ability to make long-term investment decisions.

Similarly, investors cite research demonstrating that management of material sustainability risks improves company performance and investment returns.  

Lack of consistent and usable disclosure of information on sustainability issues by companies impedes investors’ ability to make long-term investment decisions.  Nevertheless, without long-term strategic plans and corresponding management incentives, companies find sustainability concerns largely irrelevant.

While this 'chicken and egg' dilemma seems irresolvable, the Delaware courts have provided a solution.  

As the most influential arbiter of corporate law in the US, they have held that Delaware corporate law requires directors to “act prudently, loyally and in good faith to maximise the value of the corporation over the long term,” regardless of whether some shareholders would prefer short-term value maximisation.  

Enforcement of this corporate director fiduciary duty of loyalty would create a bridge linking investor and company interests without engaging many of the status quo disputes.

Roadmap to the Bridge

This year's RI New York conference panel will discuss an investor roadmap for using this long-term strategic planning bridge to improved returns and sustainable risk management practices.  This will include consideration of:

  • The Business Roundtable’s Statement on the Purpose of a Corporation commitment to “generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate” as well as to “transparency and effective engagement with shareholders”;

  • A shareholder resolution focused on improving company long-term profitability and risk management through strategic planning transparency;

  • Reframing shareholder engagements with companies around board implementation of long-term strategic planning legal obligations;

  • Use of books and records requests as an engagement tool to verify board oversight of reporting on long-term strategic planning, sustainability risks, executive compensation alignment with long-term strategic plan implementation and use of strategic plan implementation metrics; and

  • Litigation options to recover investor losses from board failure to consider long-term value creation fiduciary duty obligations.


Both boards and investors should welcome the opportunity to focus on long-term planning.  At the very least, investors deserve clarity as to whether a company is being run as a short-term or a sustainable long-term wealth creation endeavor.  

For additional background on the roadmap, see “The Elephant in the Room: Helping Delaware Courts Develop Law to End Systemic Short-Term Bias in Corporate Decision Making,” University of Michigan Law School Business & Entrepreneurial Law Review (April 2018).


Keith Johnson is Chair of the Institutional Investor Services Group at Reinhart Boerner Van Deuren s.c.

He is also co-editor of the Cambridge Handbook of Institutional Investment and Fiduciary Duty and served as Chief Legal Counsel for the State of Wisconsin Investment Board, the eighth largest public pension plan in the US.




Tiffany Reeves is a Reinhart partner and former Deputy Executive Director and Chief Legal Counsel at the Chicago Teachers’ Pension Fund.

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