Harmonizing Duties of Board Members in the Anthropocene: When Expectations Meet Reality
Anne-Marie Weber
University of Warsaw , Polandhttps://orcid.org/0000-0001-7164-7571
Anne-Christin Mittwoch
Martin Luther University Halle-Wittenberg , Germanyhttps://orcid.org/0000-0002-0465-3397
Abstract
The article confronts the European Commission’s climate policy-seconded endeavors regarding board members’ duties which it has expressed in its proposal for a Corporate Sustainability Due Diligence Directive (CSDDD Proposal) published in February 2022 with a comparative analysis of the current legal state of play in Germany and Poland. We claim that the Commission has neglected to adequately address the current understanding of board members’ duties across the Member States, which has ultimately led to the deletion of the Proposals’ provisions’ referring to the board members’ duty of care in the legislative work conducted within the Council of the European Union in November 2022. There is a possibility that these provisions (Art. 25 and 26 CSDDD Proposal) will be reinserted during the trialogue, but this is unlikely at this point. Notably, the Commission’s declaration on a mere clarifying role of the proposed harmonization measure regarding board members’ duties seems imprecise and prompts a weak interpretation of the proposed provisions, which contradicts the proclaimed policy goals. Germany might serve as an example of a Member State in which implementing the Commission’s understanding of the board members’ duty of care would not have significantly modified national company law, regardless of the interpretation chosen for the depth of the provision. If, however, a strong or medium mode of interpretation was applicable, Poland would actually be obliged to amend its legal framework fundamentally. Therefore, we contend that the legislative work on the discussed proposal was tainted by the flawed presumption that the proposed harmonization measure would merely summarize existing rules for board members’ duties. Based on the observations from our emblematic comparative juxtaposition, we argue that the idiosyncratic concepts of board members’ duties across Member States have not been sufficiently recognized as a harmonization challenge by the Commission. We contend that these methodological deficiencies led to an inconclusive wording of Article 25 of the Commission’s proposal and ultimately created an insurmountable barrier to political agreement within the Council and the “fall” of the complete concept of setting a standard of due care for board members in the proposed directive. Consequently, we claim that when jostling such a controversial and deep harmonization measure, the Commission must play its legislative A-game to have a shot at approval by the Council and later effective implementation by the Member States.
Keywords:
sustainability, board members, duty of care, comapany's interest, harmonisatnionReferences
Adamski, Dariusz. Redefining European Economic Integration. Cambridge: Cambridge University Press, 2018. (Crossref)
Armour, John. “Who Should Make Corporate Law? EC Legislation versus Regulatory Competition.” Current Legal Problems 58, no. 1 (2005): 369–413. (Crossref)
Bassen, Alexander, Kerstin Lopatta. “EC Corporate Governance Initiative Series: The EU Sustainable Corporate Governance Initiative – room for improvement.” Accessed February 3, 2023. https://blogs.law.ox.ac.uk/ business-law-blog/blog/2020/10/ec-corporate-governance-initiative-series- eu-sustainable-corporate.
Bayer, Walter. “Die Erosion der deutschen Mitbestimmung.“ Neue Juristische Wochenschrift 69, no. 27 (2016): 1930–1936.
Bianchi, Marcello, Mateja Milic. “EU Corporate Governance Initiative Series: European Companies are Short-Term Oriented: The Unconvincing Analysis and Conclusions of the Ernst & Young Study.” Accessed February 3, 2023. https://www.law.ox.ac.uk/business-law-blog/blog/2020/10/ec-corporate- governance-initiative-series-europeancompanies-are.
Birke, Max. Das Formalziel der Aktiengesellschaft. Eine juristische und ökonomische Analyse der Pflicht der Organe der Aktiengesellschaft zur Berücksichtigung der Interessen von Nichtaktionären. Baden-Baden: Nomos, 2005.
Bebchuk, Lucian A., Roberto Tallarita. “The Illusory Promise of Stakeholder Governance.” Accessed February 3, 2023. https://corpgov.law.harvard.edu/2020/03/02/the-illusory-promise-of-stakeholder-governance/. (Crossref)
Bebchuk, Lucian A., Kobi Kastiel, Roberto Tallarita. “For whom corporate leaders bargain.” Accessed February 3, 2023. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3677155.
Bertram, Daniel. “Green(wash)ing Global Commodity Chains: Light and Shadow in the EU Commission’s Due Diligence Proposal.” Accessed February 3, 2023. https://verfassungsblog.de/greenwashing-global-commodity-chains/.
Brabandt, Stephane, Claire Bright, Noah Neitzel, Daniel Schönfelder. “Due Diligence Around the World: The Draft Directive on Corporate Sustainability Due Diligence (Part 1).” Accessed February 3, 2023. https://verfassungsblog.de/due-diligence-around-the-world/.
Brakman Reiser, Dana. “Progress is Possible. Sustainability in US Corporate Law and Corporate Governance.” In The Cambridge Handbook of Corporate Law, Corporate Governance and Sustainability, edited by Beate Sjåfjell, Christopher M. Bruner, 131–145. Cambridge: Cambridge University Press, 2020. (Crossref)
Chałaczkiewicz-Ładna, Katarzyna, Tomasz Sójka, Jędrzej Jerzmanowski. “To whom Polish directors owe their duties – between shareholder primacy and political agenda.” European Business Law Review, forthcoming.
Choudhury, Barnali, Martin Petrin. Corporate Duties to the Public. Oxford: Oxford University Press, 2019. (Crossref)
Coffee Jr., John C. “No Soul to Damn: No Body to Kick”: An Unscandalized Inquiry into the Problem of Corporate Punishment.” Michigan Law Review 79, no. 3 (1981): 386–459. (Crossref)
Cognac, Pierre-Henri. “The reform of articles 1833 on social interest and 1835 on the purpose of the company in the French Civil Code: Recognition or Revolution.” In Festschrift für Karsten Schmidt zum 80. Geburtstag edited by Katharina Boele-Woelki, Florian Faust, Matthias Jacobs, Thilo Kuntz et al., 213–221. München: C.H. Beck, 2019.
Corradi, Marco. “EC Corporate Governance Initiative Series. Corporate Opportunities Rules, Long-termism and Sustainability.” Accessed February 3, 2023. https://www.law.ox.ac.uk/business-law-blog/blog/2020/10/ec-corporate-governance-initiative-seriescorporate-opportunities.
Dąbrowska, Justyna. “Social Enterprises, Cooperatives or Benefit Corporations? On Reconciling Profit and the Common Good in Doing Business from a Polish Perspective.” Review of European and Comparative Law 51, no. 4 (2022): 68. (Crossref)
Edmans, Alex. “EC Corporate Governance Initiative Series. Diagnosis Before Treatment: the Use and Misuse of Evidence in Policymaking.” Accessed February 3, 2023. https://blogs.law.ox.ac.uk/business-law-blog/blog/2020/10/ec-corporate-governance-initiative-series-diagnosis-treatment-use-and.
Eller, Klaas Hendrik, Ioannis Kampourakis. “Quantifying ‘Better Regulation’: The EU Regulatory Scrutiny Board and the Sustainable Corporate Governance Initiative.” Accessed February 3, 2023. https://verfassungsblog.de/quantifying-better-regulation. European Commission. “Sustainable corporate governance. About this initiative” Accessed February 3, 2023. https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12548-Sustainable-corporategovernance_en.
European Commission. “Sustainable corporate governance. About this consultation.” Accessed February 3, 2023. https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12548-Sustainable-corporategovernance/public-consultation_en.
European Commission. “Regulatory Scrutiny Board Opinion.” SEC(2022) 95. Accessed February 3, 2023. https://ec.europa.eu/transparency/documents-register/detail?ref=SEC(2022)95&lang=en.
European Company Law Experts Group. “EC Corporate Governance Initiative Series: A Critique of the Study on Directors’ Duties and Sustainable Corporate Governance Prepared by Ernst & Young for the European Commission.” Accessed February 3, 2023. https://blogs.law.ox.ac.uk/business-law-blog/blog/2020/10/ec-corporate-governance-initiative-series-critique-study-directors.
Fisch, Jill E., Steven Davidoff Solomon. “Should Corporations have a Purpose?” Accessed February 3, 2023. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3561164.
Gözlügöl, Alperen A., Wolf-Georg Ringe. “The EU Sustainable Corporate Governance Initiative: Where are We and Where are We Headed?” Accessed February 3, 2023. https://corpgov.law.harvard.edu/2022/03/18/the-eu-sustainable-corporate-governance-initiative-where-are-we-and-where-arewe-headed/.
Grundmann, Stefan, Hans-Wolfgang Micklitz, Moritz Renner. New Private LawTheory. Cambridge: Cambridge University Press, 2021. (Crossref)
Hansen, Jesper Lau. “Zombies v. Subsidiarity – Opening on 8 December 2021.” Accessed February 3, 2023. https://www.law.ox.ac.uk/business-law-blog/blog/2021/10/zombies-v-subsidiarity-opening-8-december-2021.
Hansen, Jesper Lau. “Unsustainable Sustainability.” Accessed February 3, 2023. https://www.law.ox.ac.uk/business-law blog/blog/2022/03/unstainable-sustainability.
Hart, Oliver, Luigi Zingales. “Companies Should Maximize Shareholder Welfare Not Market Value.” ECGI Finance Working Paper 521 (2017): 1–33. (Crossref)
Hofmann, Herwig C.H., Katerina Pantazatou and Giovanni Zaccaroni. The Metamorphosis of the European Economic Constitution. Cheltenham: Edward Elgar Publishing, 2019. (Crossref)
Hommelhoff, Peter. “Nichtfinanzielle Ziele in Unternehmen von öffentlichem Interesse, Die Revolution übers Bilanzrecht.“ In Festschrift für Bruno M. Kübler zum 70. Geburtstag, edited by Reinhard Bork, Godehard Kayser and Frank Kebekus, 291–299. Müchen: C.H. Beck, 2015.
Hommelhoff, Peter. “Die OECD.Priciples on Corporate Governance – ihre Chancen und Risiken aus dem Blickwinkel der deutschen corporate governance- Bewegung.“ Zeitschrift für Unternehmens- und Gesellschaftsrecht 30, no. 2 (2001): 238–267. (Crossref)
Hsieh, Nien-hê; Marco Meyer, David Rodin, Jens van’t Klooster, “The social purpose of corporations.” Journal of the British Academy 6, no. 1 (2018): 49–73. (Crossref)
Ireland, Paddy. “Company Law and the Myth of Shareholder Ownership.” The Modern Law Review 62 (1999): 32–57. (Crossref)
Johnston, Andrew. “Reforming English Company Law to Promote Sustainable Companies.” European Company Law 11, no. 2 (2014): 63–66. (Crossref)
Keay, Andrew. The Enlightened Shareholder Value Principle and Corporate Governance. London: Routledge, 2013. (Crossref)
Mayer, Colin. Prosperity: Better business makes the greater good. Oxford: Oxford University Press, 2018.
Mazur, Paweł. “Nowy paradygmat ładu korporacyjnego. Globalne tendencje w dyskusji o interesie spółki i ich możliwy wpływ na prawo polskie.” Państwo i Prawo 7 (2022): 114–128.
Mélon, Lela. Shareholder Primacy and Global Business, Re-clothing the EU Corporate Law. London: Routledge, 2021.
Micklitz, Hans-Wolfgang. “The Transformative Politics of European Private Law.” In The Law of Political Economy Transformation in the Function of Law, edited by Poul F. Kjaer, 205–227. Cambridge: Cambridge University Press, 2020. (Crossref)
Micklitz, Hans-Wolfgang. The Many Concepts of Social Justice in European Private Law. Cheltenham: Edward Elgar Publishing, 2011. (Crossref)
Mittwoch, Anne-Christin, Florian Möslein. “Der Europäsiche Aktionsplan zur Finanzierung eines nachhaltigen Wachstums.” Wertpapier-Mitteilungen Zeitschrift für Wirtschafts-und Bankrecht 11, no. 73 (2019): 481–489.
Möslein, Florian, Karsten Engsig Sørensen. “Sustainable Corporate Governance. A Way Forward.” ECGI – Law Working Paper 583 (2021): 1–13. (Crossref)
Mülbert, Peter O. “Shareholder Value aus rechtlicher Sicht. “Zeitschrift für Unternehmens- und Gesellschaftsrecht 26, no. 2 (1997): 129–172. (Crossref)
Opalski, Adam. “Poland. Introduction. Historical Development of the Polish Model of Company Law.” In Company Laws of the EU: A Handbook, edited by Andrea Vicari, Alexander Schall, 661–671. München: C.H. Beck, 2020.
Opalski, Adam. Prawo zgrupowań spółek. Instytucje Prawa Prywatnego. Warszawa: C.H. Beck, 2012.
Opalski, Adam. “O pojęciu interesu spółki handlowej.” Przegląd Prawa Handlowego 11 (2008): 16–23.
Oplustil, Krzysztof. Instrumenty nadzoru korporacyjnego (corporate governance) w spółce akcyjnej. Warszawa: C.H. Beck, 2010.
Oplustil, Krzysztof, Arkadiusz Radwan. “Company law in Poland: Between Autonomous Development and Legal Transplants.” In Private Law in Eastern Europe, edited by Christa Jessel-Holst, Rainer Kilms, Alexander Trunk, 445–498. Tübingen: Mohr Siebeck, 2011. (Crossref)
Oplustil, Krzysztof, Anne-Marie Weber. “Country Report Poland.” In Sustainable Finance in Poland, edited by Jens Ekkenga, Martin Winner. Tübingen: Mohr Siebeck, 2023, forthcoming.
Pinior, Piotr. “Duty of loyalty and due care of the board member under Polish law.” Review of European and Comparative Law 51, no. 4 (2022): 15. (Crossref)
Publications Office of the European Union. “Study on due diligence requirements through the supply chain.”, Accessed February 3, 2023. https://op.europa. eu/en/publication-detail/-/publication/8ba0a8fd-4c83-11ea-b8b7-01
aa75ed71a1/language-en.
Publications Office of the European Union. “‘Study on directors’ duties and sustainable corporate governance.”, Accessed February 3, 2023. https://op.europa.eu/en/publication-detail/-/publication/e47928a2-d20b-11ea-adf7-01aa75ed71a1/language-en.
Regierungskommission Deutscher Corporate Governance Kodex, “German CorporateGovernance Code.” Accessed February 3, 2023. https://www.dcgk.de/en/code//foreword.html.Rühmkorf, Andreas. “Shareholder Value versus Corporate Sustainability.” In The Cambridge Handbook of Corporate Law, Corporate Governance and Sustainability, edited by Beate Sjåfjell, Christopher M. Bruner, 232–245.Cambridge: Cambridge University Press, 2020. (Crossref)
Schubert, Claudia. Das Unternehmensinteresse – Maßstab für die Organwalter der Aktiengesellschaft. Baden-Baden: Nomos, 2020. (Crossref)
Safjan, Marek, Aneta Wiewiórska-Domagalska. “Political Foundations of European Private Law: Rethinking the East-West Division Lines.” In The Foundations of European Private Law, edited by Roger Brownsword, Hans-Wolfgang
Micklitz, Leone Niglia, Stephen Weatherill, 265–284. Oxford, Portland: Hart Publishing, 2011.
Salacuse, Jeswald W. “Corporate Governance, Culture and Convergence: Corporations American Style or with a European Touch.” Law and Business Review of the Americas 9, no. 1 (2003): 33–62.
Sjåfjell, Beate, Christopher M. Bruner. The Cambridge Handbook of Corporate Law, Corporate Governance and Sustainability. Cambridge: Cambridge University Press, 2020. (Crossref)
Sjåfjell, Beate, Christopher M. Bruner. “Regulating for Corporate sustainability: Why the public–private divide misses the point.” In Understanding the company, edited by Barnali Choudhury, Martin Petrin, 145–164. Cambridge: Cambridge University Press, 2017. (Crossref)
Sjåfjell, Beate, Christopher M. Bruner. “Sustainable Value Creation Within Planetary Boundaries–Reforming Corporate Purpose and Duties of the Corporate Board.” Sustainability 12, no. 15 (2020): 6245. (Crossref)
Sjåfjell, Beate, Jukka Mähönen. “Corporate Purpose and the EU Corporate Sustainability Due Diligence Proposal.” Accessed February 3, 2023. https://blogs.law.ox.ac.uk/business-law-blog/blog/2022/02/corporate-purpose-and-eu-corporate-sustainability-due-diligence.
Stefanicki, Robert. “Interest of the Company – the Discussion on Axiological Choices.” In Review of European and Comparative Law 51, no. 4 (2022): 25–37. (Crossref)
United Nations. “Transforming our world: the 2023 Agenda for Sustainable Development.” Accessed February 3, 2023. https://sustainabledevelopment.un.org/post2015/transformingourworld/publication.
Weber, Anne-Marie, Zofia Mazur, Aleksandra Szczęsna. “Zrównoważony ład korporacyjny (sustainable corporate governance) kierunek ewolucji polskiego prawa spółek?.” Przegląd Prawa Handlowego 6 (2022): 20–33.
Weber, Anne-Marie, Zofia Mazur. “Postulat zrównoważonego wzrostu gospodarczego jako wyzwanie dla polskiego prawa handlowego.” In Sto lat polskiego prawa handlowego. Księga jubileuszowa dedykowana Profesorowi Andrzejowi Kidybie, edited by Małgorzata Dumkiewicz, Katarzyna Kopaczyńska-Pieczniak, Jerzy Szczotka. 218–229. Warszawa: Wolters Kluwer, 2020.
Wen, Shuangge. “The Magnitude of Shareholder Value as the Overriding Objective in the UK – The Post-Crisis Perspective.” Journal of International Banking Law and Regulation 26, no. 7 (2011): 325–338.
von Bonin, Gregor. Die Leitung der Aktiengesellschaft zwischen Shareholder Value und Stakeholder-Interessen. Baden-Baden: Nomos, 2004.
University of Warsaw
Dr., Assistant Professor, Faculty of Law and Administration, University of Warsaw, address: Krakowskie Przedmieście 26/28, 00-927 Warszawa, Poland.
https://orcid.org/0000-0001-7164-7571Martin Luther University Halle-Wittenberg
Prof. Dr., Chair of Civil Law, European and International Business Law Martin-Luther-Universit.t Halle-Wittenberg, address: Universit.tsplatz 3–5, Juridicum, Zi. 2.15, 06099 Halle (Saale), Germany.
https://orcid.org/0000-0002-0465-3397
