Nudging for Corporate Long-Termism and Sustainability

In view of climate change, population growth and environmental degradation, the quest for sustainability ranks high on the political agenda. Due to the economic importance and impact of business companies, a particular focus is on their conduct of business, more specifically on corporate social responsibility. In a similar vein, the global financial crisis has turned public attention to issues of short-termism in the financial sector. From a corporate law perspective, the key challenge of such efforts is to reconcile considerations of long-termism and of social or ecological interests with the fundamental objectives of companies. Yet these corporate ends are anything but well-defined.

Au contraire, they are subject of perpetual discussions in corporate law. Recently, however, legislators have more and more often intervened to encourage companies to pursue specific, pre-defined goals. Yet they are reluctant to introduce mandatory and strict provisions on the corporate purpose, but pursue subtle regulatory strategies. To different degrees, they try to “nudge” corporate actors towards long-termism and sustainability. While nudges have extensively been studied in other areas of law, we focus specifically on corporate law strategies to enhance long-termism and sustainability. We examine how legislators have used different forms of regulatory interventions to nudge companies towards specific goals, namely towards long-termism and sustainability. More specifically, we analyze different ways of motivating either directors or shareholders by investigating different solutions found in the EU and US with respect to different companies ranging from listed companies to social enterprises.