Credit: hxdbzxy/Shutterstock.com

It is no secret that corporate counsel wear many hats. Their daily duties often include a foray into financial, business development and compliance matters, making them uniquely dressed to advise on matters beyond technical legal issues.

Now more than ever, this fluid role is essential. Thanks to the Business Roundtable, the purpose of corporations is expanding, and it is only natural that boards and officers will turn to the versatile corporate counsel for guidance.

For 40 years, the Business Roundtable believed, like most, that corporations should exist to return profits to their shareholders; however, earlier this year, the nearly 200 blue-ribbon executives that make up the Business Roundtable collectively changed their tune.

Instead of merely appeasing shareholders, CEOs of the Business Roundtable now believe that corporations should exist to serve all stakeholders in the free-market system. In addition to churning profit, corporations should generate good jobs; help maintain a sustainable and robust economy; and encourage innovation, a healthy environment and economic opportunity for all.

As acceptance of stakeholder corporate governance grows, boards and executives will likely seek the advice of corporate counsel. In particular, there are three ways that corporate counsel may encounter stakeholder-focused initiatives. Discussed below are suggestions to help corporate counsel prepare and tailor their response to leadership on this issue.

Selling Stakeholder Corporate Governance to the Company

First, corporate counsel themselves may believe that their company should engage in stakeholder-focused initiatives, and they will seek the approval of the board and executives to implement them.

It should be easy to convince directors and officers to do good for society. The more significant hurdle is proving that doing good for society is also good for the bottom line. Baseline comparisons to other companies in their market will be crucial for any corporate counsel seeking to convince their board and officers of the possible long-term profit derived from environmental, social and governance (ESG) initiatives.

Fortunately, according to Deloitte Global's Sustainability Leader Oliver Jan, trends in stakeholder reporting have moved toward transparency. Although ESG reporting is not universally required, several stock exchanges, business organizations and the media have made ESG data more accessible.

Because leadership will most likely focus on financial ramifications, it may be worthwhile to engage an ESG data provider for research, rankings, ratings and indices that have been reported by other companies.

Implementing ESG Initiatives at the Request of the C-suite

Once executives have decided to broaden the company's focus to all stakeholders, corporate counsel might be called upon for guidance on how to implement new initiatives.

The first thing that corporate counsel should do is assist in articulating clear and measurable goals on ESG issues through a statement of purpose and other organizational documents. Corporate counsel may want to consider whether the C-suite is capable of managing these initiatives or whether it is necessary to create a chief sustainability officer position.

Also, formal processes should be put into place so that progress toward ESG goals can be measured and so that the company can remain responsive to demands for information.

In the same vein, corporate counsel should make sure that ESG disclosures are a priority. Since stakeholder initiatives are not governed by a uniform disclosure standard, it will be imperative for corporate counsel to remain up to date on the changing standards of organizations and stock exchanges, including the Global Reporting Initiative, Sustainability Accounting Standards Board and the World Federation of Exchanges.

Corporate counsel should also consider whether director and officer insurance covers the company's employees from potential liability related to ESG disclosures.

Responding to a Push by the Board of Directors

Finally, directors might push stakeholder initiatives on the company's officers, with corporate counsel finding themselves stuck in the middle. Unlike the other forward-looking encounters mentioned here, this encounter is most likely to be reactive.

This situation will likely arise after a scandal has emerged as a result of the day-to-day leadership of a company's officers. In response, the board may want to implement initiatives to lessen the blow of the scandal or misdeed.

Here, corporate counsel can act as a facilitator between the directors and officers. According to the Task Force on the Lawyers' Role in Corporate Governance, corporate scandal can occur when there is not a direct link between corporate counsel and the board.

Before ambushing a resistant C-suite, corporate counsel should assist the board in defining ESG risks and opportunities, communicating with stakeholders and investors, and ensuring the board has the right composition and structure to take on ESG integration for long-term value creation.

In short, by broadening the purpose of a corporation to include all stakeholders, society has become another bottom line for companies. Corporate counsel will play a vital role in facilitating this new purpose.

Tod Northman, a partner at Tucker Ellis, has 25 years of business and corporate law experience in corporate organization and governance, business transactions, artificial intelligence technology, contract negotiation, and dispute resolution. He heads the firm's conscious capitalism working group, regularly counsels businesses considering B Lab certification, and has been active in helping draft Ohio's benefit corporation statute (as yet unadopted).

Savannah Fox is an associate with the firm. She maintains a diverse practice defending manufacturers, companies, and hospitals in commercial litigation, employment, and product liability matters. She is a published author in the area of ESG and corporate social responsibility.