Document Type

Article

Publication Date

2022

Abstract

Environmental, social, and governance accountability for companies has become an important topic in popular and academic debate in modern society. The idea that corporations should have ESG goals has been embraced by major investment companies, employees, and many corporations themselves. Yet, less attention has been focused on how corporate enterprise law—which governs how corporations structure their relationships between parent corporations and their subsidiaries—creates or contributes to the ESG concerns that the public has with corporations in the first place. Modern enterprise law allows corporations, particularly those operating across national borders, to use their subsidiaries to avoid responsibility for their public and private obligations.

This Article examines how a governance aspect of ESG—corporate enterprise law—creates social and environmental concerns through three lenses: (1) limited liability, (2) international tax, and (3) environmental law. The major contributions of this Article are to identify how the internal form of the corporation itself creates ESG concerns and to sketch out how current law could be adapted to limit those harms. Using the Foreign Corrupt Practices Act as a model, this Article explains how creating an obligation on a parent company to supervise their subsidiaries could provide for greater global corporate responsibility while minimizing corporations’ competitiveness concerns. Rather than harming corporate enterprises, such governance reforms can enable corporations to pursue ESG goals without suffering competitive losses.

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Library of Congress Subject Headings

Corporation law, Corporate governance, Social responsibility of business, Business enterprises--Law and legislation

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