Disclosing Corporate Diversity

*Atinuke O. Adediran, J.D., Ph.D., Associate Professor of Law, Fordham University School of Law. I am grateful to Douglas Baird and Nestor Davidson for helpful conversations at the very early stages of this project. This Article also benefitted from feedback and conversations with Afra Afsharipour, Emilie Aguirre, Pamela Bookman, James Brudney, Ryan Bubb, Bennett Capers, John Coffee, Courtney Cox, Mitchell Crusto, Elizabeth Cooper, Deborah Denno, Lisa Fairfax, Paolo Galizzi, Caroline Gentile, Jennifer Gordon, Bernice Grant, Abner Greene, Sean Griffith, Todd Henderson, Tanya Hernández, William Hubbard, Tom C.W. Lin, Jonathan Masur, Maria Maciá, Russell Pearce, Elizabeth Pollman, Catherine Powell, Jed Shugerman, Omari Simmons, Linda Sugin, Julie Suk, Steve Thel, Ian Weinstein, and Maggie Wittlin. I am grateful to participants in faculty workshops at the University of Connecticut School of Law, Fordham University School of Law, and Rutgers Law School. I also thank participants at the AALS Business Associations Section Works-in-Progress Session, Culp Colloquium at the University of Chicago Law School, and the Corporate Governance Forum at the University of California, Berkeley Center for Law and Business. Thanks to Anastasia Lacina, Teresa Huang, and editors at the University of Virginia School of Law for excellent editorial support.Show More

This Article’s central claim is that disclosures can be used instrumentally to increase diversity in corporate America in terms of race, gender, sexual orientation, and disability. Until recently, scholars and policymakers have underappreciated this possibility because diversity was often omitted from the larger Environmental, Social, and Governance (“ESG”) disclosures context, even though, as this Article empirically shows, public companies make diversity disclosures in that context.

Diversity disclosures are important not only for shareholders’ interests in transparency, but also for the benefit of other stakeholders, including employees, customers, and the communities in which companies operate, who want to know whether companies are diverse to determine where to work, what brands to buy, and what companies value. The literature has yet to explore the significance of diversity disclosures for the benefit of all these stakeholders.

This Article argues that legal reform is needed to use disclosures to improve corporate diversity for the benefit of all stakeholders. Policy-makers must go beyond the confines of the securities laws to translate disclosure into societal change. This Article examines contemporary law and policy approaches that fall short of having forward-looking provisions that would have an impact on improving diversity. It proposes disclosure rules with statistical and forward-looking provisions and mechanisms that shareholder and employee activists, and others, can use to pressure companies to improve diversity incrementally.

Introduction

Since 2020, diversity has become a central concern for companies and their leaders, prompting more companies to voluntarily incorporate diversity into their Environmental, Social, and Governance (“ESG”) disclosures.¹ 1.ESG, which has its origins in the United Nations’ environmental movement, is about integrating environmental, social, and governance issues into business. For an excellent discussion about the origins and ambiguity around the term ESG, see Elizabeth Pollman, The Making and Meaning of ESG 20–29 (Inst. L. & Econ., Working Paper No. 659, 2022).Show More A 2021 survey showed that diversity, equity, and inclusion was the top focus—95% for public companies and 63% for private companies—in ESG reports that companies are currently disclosing or plan to disclose in the future.² 2.Thompson Hine, An ESG Snapshot: Survey Confirms Companies Are Responding to Increasing Expectations 5 (2021), https://admin.thompsonhine.com/wp-content/uploads/202‌2/04/An_ESG_Snapshot.pdf [https://perma.cc/VHV7-9SE8]. Public companies are more likely to disclose ESG matters than private companies. L. Emily Hickman, Information Asymmetry in CSR Reporting: Publicly-Traded Versus Privately-Held Firms, 11 Sustainability Acct., Mgmt. & Pol’y J. 207, 219 (2020).Show More Indeed, as the empirical research in this Article shows, there has been a significant increase in diversity disclosures in companies’ ESG reports in the last five years. This Article defines corporate diversity as the representation and inclusion of employees, management, and board members in a company, by gender, race, ethnicity, LGBTQ+ status, and disability, and the provision of equal employment opportunity.

This Article makes three claims. The first is that disclosures can be used instrumentally to diversify corporate boardrooms and workplaces. The second is that while diversity disclosures are important for shareholders who want to know about diversity in the companies in which they invest, other stakeholders, including employees, suppliers, customers, community members, advocacy groups of various types, activists, reformers, and the public as a whole,³ 3.Survey after survey reveals that employees, customers, and the public all want companies to encourage or prioritize workplace diversity and inclusion. See, e.g., Susan Caminiti, Majority of Employees Want to Work for a Company that Values Diversity, Equity and Inclusion, Survey Shows, CNBC: Workforce Wire (Apr. 30, 2021, 3:12 PM), https://www.cnbc.com/2021/04/30/diversity-equity-and-inclusion-are-important-to-workers-survey-shows.html# [https://perma.cc/8NPJ-HZH8]; Shelby Jordan, 64% of Consumers Consider Making an Immediate Purchase After Seeing Diverse Advertisements, New Data Shows, PR Newswire (Nov. 11, 2020), https://www.prnewswire.com/news-releases/64-of-consumers-consider-making-an-immediate-purchase-after-seeing-diverse-advertisements-ne‌w-data-shows-301170981.html [https://perma.cc/5XHT-KECK]; Victoria Petrock, Consumers Expect Brands to Be Inclusive, Insider Intel. (Nov. 25, 2020), https://www.emarketer.com/content/consumers-expect-brands-inclusive [https://perma.cc/D‌M29-8H9G]; Juliana Menasce Horowitz, Americans See Advantages and Challenges in Country’s Growing Racial and Ethnic Diversity, Pew Rsch. Ctr. (May 8, 2019), https://www.pewresearch.org/social-trends/2019/05/08/americans-see-advantages-and-challe‌nges-in-countrys-growing-racial-and-ethnic-diversity/ [https://perma.cc/X568-XDGJ] (reporting that 75% of Americans say it is very or somewhat important for companies to promote racial and ethnic diversity in their workplace).Show More are also interested in diversity disclosures. The literature has yet to explore the importance of corporate diversity disclosures to these other stakeholders. The third is that legislative reform is needed for disclosures to be used as an instrument to increase corporate diversity.

The Article makes theoretical, empirical, and policy contributions in relation to these claims. Theoretically, it brings the ESG and corporate diversity literatures together for the first time. ESG is about the role of business in society, particularly whether and how companies consider the public interest in their practices and policies.⁴ 4.Sean O’Neill, What is the Difference Between CSR and ESG?, Corp. Governance Inst. (July 6, 2022), https://www.thecorporategovernanceinstitute.com/insights/lexicon/what-is-the-difference-between-csr-and-esg [https://perma.cc/R7QY-D8VL].Show More

Scholars have long written about Corporate Social Responsibility (“CSR”) and ESG, and corporate diversity as two separate subjects.⁵ 5.See infra notes 31–36 and accompanying text.Show More CSR and ESG scholarship can be traced to the 1930s debate between Columbia Law School’s Adolph Berle and Harvard Law School’s Merrick Dodd.⁶ 6.Ronald Chen & Jon Hanson, The Illusion of Law: The Legitimating Schemas of Modern Policy and Corporate Law, 103 Mich. L. Rev. 1, 35 (2004).Show More Berle described the protection of shareholders as the critical challenge facing corporate law.⁷ 7.A.A. Berle, Jr., Corporate Powers as Powers in Trust, 44 Harv. L. Rev. 1049, 1049 (1931).Show More Dodd focused on the power dynamics between corporations and society and argued that corporate managers should be attentive not just to shareholders, but to other stakeholders.⁸ 8.E. Merrick Dodd, Jr., For Whom Are Corporate Managers Trustees?, 45 Harv. L. Rev. 1145, 1158–61 (1932).Show More This debate crystallized in the 1970s—at a similar moment as the environmental movement sought to mitigate ecological harm caused by certain corporate practices—with Milton Friedman’s proclamation that managers should act primarily in the interest of shareholders rather than other stakeholders.⁹ 9.Milton Friedman, A Friedman Doctrine—The Social Responsibility of Business is to Increase Its Profits, N.Y. Times (Sept. 13, 1970), https://www.nytimes.com/‌1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html/ [https://perma.cc/6VKK-MWZV].Show More This academic debate is still very much alive today.¹⁰ 10.See Jill E. Fisch & Steven Davidoff Solomon, Should Corporations Have a Purpose?, 99 Tex. L. Rev. 1309, 1309 (2021); Mark J. Roe, Corporate Purpose and Corporate Competition, 99 Wash. U. L. Rev. 223, 223–25 (2021); Tom C.W. Lin, Incorporating Social Activism, 98 B.U. L. Rev. 1535, 1537–38 (2018); Margaret M. Blair & Lynn A. Stout, A Team Production Theory of Corporate Law, 85 Va. L. Rev. 247, 249–51 (1999); David Millon, Essay, New Game Plan or Business As Usual? A Critique of the Team Production Model of Corporate Law, 86 Va. L. Rev. 1001, 1001–03 (2000); Ronald M. Green, Shareholders as Stakeholders: Changing Metaphors of Corporate Governance, 50 Wash. & Lee L. Rev. 1409, 1409–14 (1993); Oliver Williamson, Corporate Governance, 93 Yale L.J. 1197, 1197–1200 (1984).Show More The Business Roundtable’s declaration in 2019 that companies have a “fundamental commitment to all . . . stakeholders”¹¹ 11.Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy that Serves All Americans’, Bus. Roundtable (Aug. 19, 2019), https://www.business‌roundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans [https://perma.cc/4UTS-ABFF].Show More further complicated the debate since some scholars have argued that the declaration does not drastically shift companies’ purpose beyond shareholder wealth maximization.¹² 12.See, e.g., Dorothy S. Lund, Corporate Finance for Social Good, 121 Colum. L. Rev. 1617, 1619–20 (2021). CEOs from 181 companies representing some of America’s largest companies signed the declaration. Bus. Roundtable, supra note 11.Show More

The corporate diversity literature has its roots in the passage of Title VII of the Civil Rights Act of 1964 and the Equal Employment Opportunity Act of 1972, which, among other things, address the role of corporations in gender and racial discrimination in the workplace and the economy.¹³ 13.Civil Rights Act of 1964, Pub. L. No. 88-352, §§ 703–704, 78 Stat. 241, 253–59; Equal Employment Opportunity Act of 1972, Pub. L. No. 92-261, 86 Stat. 103.Show More The U.S. Supreme Court’s diversity discourse has been integrated into corporate policies since the 1990s, which accelerated in 2020.¹⁴ 14.See, e.g., Regents of Univ. of Cal. v. Bakke, 438 U.S. 265, 313 (1978) (concluding that universities might use race as one factor among others to promote the “robust exchange of ideas” that might flow from a racially diverse academic community); see also Ellen Berrey, The Enigma of Diversity: The Language of Race and the Limits of Racial Justice 27, 196–97 (2015) (discussing the development of diversity management in the late twentieth century).Show More

Traditionally, CSR and ESG disclosures—which are typically not covered by financial metrics—were internal and external facing documents companies used to communicate their philanthropic efforts and their impact on the environment and the communities in which they operate.¹⁵ 15.Catherine Cote, What is a CSR Report and Why is it Important?, Harv. Bus. Sch. Online (Apr. 20, 2021), https://online.hbs.edu/blog/post/what-is-a-csr-report [https://perma.cc/6XK9‌-SL6M].Show More The CSR and ESG disclosure literature mirrored this traditional form of disclosures by mostly focusing on climate, environmental, and sustainability matters, and to some extent philanthropy, with little to no engagement with diversity.¹⁶ 16.See, e.g., Cynthia A. Williams, The Securities and Exchange Commission and Corporate Social Transparency, 112 Harv. L. Rev. 1197, 1199–1201 (1999); Russell B. Stevenson, Jr., The SEC and the New Disclosure, 62 Cornell L. Rev. 50, 50–59 (1976); Douglas M. Branson, Progress in the Art of Social Accounting and Other Arguments for Disclosure on Corporate Social Responsibility, 29 Vand. L. Rev. 539, 575–76, 581 (1976); Theodore Sonde & Harvey L. Pitt, Utilizing the Federal Securities Laws to “Clear the Air! Clean the Sky! Wash the Wind!”, 16 How. L.J. 831, 834–35 (1971); David Hess, Social Reporting: A Reflexive Law Approach to Corporate Social Responsiveness, 25 J. Corp. L. 41, 42–46 (1999); Janet E. Kerr, The Creative Capitalism Spectrum: Evaluating Corporate Social Responsibility Through a Legal Lens, 81 Temp. L. Rev. 831, 846 (2008); Thomas Lee Hazen, Social Issues in the Spotlight: The Increasing Need to Improve Publicly-Held Companies’ CSR and ESG Disclosures, 23 U. Pa. J. Bus. L. 740, 741–47 (2021); Daniel C. Esty & Quentin Karpilow, Harnessing Investor Interest in Sustainability: The Next Frontier in Environmental Information Regulation, 36 Yale J. on Regul. 625, 625–28 (2019).Show More Corporate diversity scholarship, on the other hand, has mostly focused on the business case for diversity, largely omitting the CSR and ESG disclosure framework.¹⁷ 17.See, e.g., Jeffrey Meli & James C. Spindler, The Promise of Diversity, Inclusion, and Punishment in Corporate Governance, 99 Tex. L. Rev. 1387, 1387–93 (2021); Lisa M. Fairfax, Board Diversity Revisited: New Rationale, Same Old Story?, 89 N.C. L. Rev. 855, 855–59 (2011) [hereinafter Fairfax, Revisited] (criticizing the overreliance on business justifications for diversifying corporate boards); Lisa M. Fairfax, The Bottom Line on Board Diversity: A Cost-Benefit Analysis of the Business Rationales for Diversity on Corporate Boards, 2005 Wis. L. Rev. 795, 796–99 [hereinafter Fairfax, Bottom Line]. The exception is Veronica Martinez & Gina-Gail S. Fletcher, Equality Metrics, 130 Yale L.J.F. 869, 869, 875 (2021), which addresses the role of diversity disclosures but in the context of shareholder transparency and decision making.Show More In fact, expanding the ESG literature to include corporate diversity is important for developing new theories of ESG and informing diversity policy as the field changes.

Empirically, this Article shows that, at least in the last five years, public companies have firmly integrated diversity disclosures in their ESG reports. This Article uses machine-learning techniques to analyze 3,461 ESG reports for 1,288 Russell 3000 index companies listed on the Nasdaq Stock Market LLC (“Nasdaq”) and the New York Stock Exchange (“NYSE”) for the five-year period from 2017 to 2021. For example, 95% of corporations mentioned racial or gender diversity in their 2021 ESG disclosures.

In terms of policy, this Article makes the case for using disclosures instrumentally to bring about change that would benefit all stakeholders through new legislation. This Article addresses the limitations of emerging attempts to mandate diversity disclosures, particularly by the Securities and Exchange Commission (“SEC”). Since the 1960s and 1970s, companies have grappled with whether and how to disclose their CSR and ESG policies and practices that impact shareholders, other stakeholders, and society.¹⁸ 18.See infra Section I.C and accompanying text.Show More Scholars and other commentators have since debated whether the SEC has the authority to require the disclosure of ESG practices.¹⁹ 19.See generally Williams, supra note 16, at 1205–07 (arguing that the SEC has the authority to require expanded disclosure and should use this authority to ensure “corporate social transparency”); Stevenson, supra note 16, at 58–62 (explaining and rebutting the SEC’s reluctancy to use its authority to require the disclosure of policies related to social goods); Branson, supra note 16, at 631–34 (discussing Judge Charles Richey’s perspective on the SEC’s authority to require social responsibility disclosure); Sonde & Pitt, supra note 16, at 835–36 (discussing the SEC’s opportunity to “help promote the nation’s environmental policy” through disclosure requirements related to the National Environmental Policy Act); Paul G. Mahoney & Julia D. Mahoney, The New Separation of Ownership and Control: Institutional Investors and ESG, 2021 Colum. Bus. L. Rev. 839, 843–45 (cautioning the SEC against adopting ESG disclosure mandates).Show More Even as academic debates have continued, however, corporations began to voluntarily disclose their CSR and ESG reports as early as the 1990s, largely because of shareholder pressure for transparency and information.²⁰ 20.See Cathy Hwang & Yaron Nili, Shareholder-Driven Stakeholderism, U. Chi. L. Rev. Online (Apr. 15, 2020), https://lawreviewblog.uchicago.edu/2020/04/15/shareholder-driven-stakeholderism-hwang-nili/ [https://perma.cc/7FTT-RYGP]; Andrew J. Hoffman, A Strategic Response to Investor Activism, 37 Sloan Mgmt. Rev. 51, 51 (1996); Michal Barzuza, Quinn Curtis & David H. Webber, Shareholder Value(s): Index Fund ESG Activism and the New Millennial Corporate Governance, 93 S. Cal. L. Rev. 1243, 1265 (2020); Stavros Gadinis & Amelia Miazad, Corporate Law and Social Risk, 73 Vand. L. Rev. 1401, 1464 (2020).Show More

In August 2021, the SEC approved Nasdaq’s rule requiring companies listed on its exchange to disclose the diversity of their boards pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 , and Rule 19b-4,²¹ 21.15 U.S.C. § 78s(b)(1); 17 C.F.R. § 240.19b-4 (2006).Show More making it the first-ever ESG disclosure mandate. While the rule is an important start to mandating diversity disclosures, the SEC is limited in its authority to use disclosures for social change. This limitation is evidenced by three features of the Nasdaq/SEC rule. First, the rule requires Nasdaq-listed companies to have two diverse board members—at least one director who self‑identifies as female and at least one director who self-identifies as an underrepresented minority or as LGBTQ+—or explain why they lack diversity on their boards.²² 22.Underrepresented minority is defined as identifying as Black (or African American), Latinx, Asian, Native American, Alaska Native, Native Hawaiian, Pacific Islander, or a combination of multiple of these ethnicities; LGBTQ+ is defined as an individual who “self-identifies as any of the following: lesbian, gay, bisexual, transgender, or as a member of the queer community.” Order Approving Changes to Listing Rules Related to Board Diversity, 86 Fed. Reg. 44424, 44424–25, 44425 n.18 (Aug. 6, 2021). The SEC itself is looking to propose its own board diversity disclosure regulations for companies and may include disability status in its rules. See Lydia Beyoud & Andrew Ramonas, Disability Advocates Seek Inclusion in SEC Board Diversity Rules, Bloomberg L. (Sept. 30, 2021), https://news.bloomberglaw.com/‌esg/disability-advocates-seek-inclusion-in-sec-board-diversity-rules [https://perma.cc/3Z7W-H2KD].Show More The “explain” portion of this “disclose or explain” approach means that companies do not have to disclose two diverse board members if they can explain why they lack board diversity. The SEC states that, “[w]hile the proposal may have the effect of encouraging some Nasdaq-listed companies to increase diversity on their boards, the proposed rules do not mandate any particular board composition.”²³ 23.Order Approving Changes to Listing Rules Related to Board Diversity, 86 Fed. Reg. at 44428.Show More Therefore, the rule advances shareholder transparency but stops short of using disclosures to increase board diversity. Second, the rule applies only to boards and would not require the disclosure of employee or executive diversity, which significantly limits its reach. Third, it only applies to public companies listed on the Nasdaq stock exchange; it does not apply to companies listed on other exchanges or private companies with large valuations that are like public companies, thereby omitting a large subset of the economy.

This Article argues that Congress should step in to establish a diversity disclosure obligation that can increase diversity in both public and private companies. The United States House of Representatives recently passed the ESG Disclosure Simplification Act of 2021 (“ESG Disclosure Act”),²⁴ 24.The ESG Disclosure Simplification Act was passed as part of the Corporate Governance Improvement and Investor Protection Act, H.R. 1187, 117th Cong. (as passed by House, June 16, 2021). The Bill was originally introduced in the House as the ESG Disclosure Simplification Act (“EDSA”) on February 18, 2021. 167 Cong. Rec. H535 (daily ed. Feb. 18, 2021).Show More which would require companies to disclose their ESG matters, including employee and board diversity.²⁵ 25.H.R. 1187 § 603. The Act would also require companies to disclose their environmental and climate risk mitigation measures. Id. § 403.Show More While the proposed ESG Disclosure Act is a significant step toward mandating diversity disclosures for transparency, it lacks a forward-looking component to increase diversity over time.²⁶ 26.See Atinuke O. Adediran, Disclosures for Equity, 122 Colum. L. Rev. 865, 873–74 (2022) (explaining how to use disclosures to reach racial equity ends).Show More This Article proposes a comprehensive disclosure regime with statistical and forward-looking components and explains how shareholder and employee activists can use disclosures to push companies to actually increase diversity incrementally over time.

This Article proceeds in four parts. Part I discusses the scholarship on CSR and ESG, the history of movements to make CSR and ESG disclosures mandatory, and the history of voluntary ESG disclosures. Part II discusses contemporary law, policy, and private ordering around diversity disclosures, including the recent Nasdaq/SEC rule mandating diversity disclosures and Congress’s attempt to mandate diversity disclosures in the ESG Disclosure Act. Part III describes the data and methods used for analysis and empirically shows that diversity disclosures are already firmly included in ESG reports. Part IV analyzes the shortcomings of the Nasdaq/SEC and legislative approaches, arguing that because the purpose of securities laws is limited to ensuring transparency for shareholders to make investment decisions, it is imperative to have a comprehensive disclosure regime that can be used to improve board and workplace diversity rather than to merely provide transparency or serve other shareholder interests. Part IV then proposes a comprehensive disclosure legislation that includes statistical information and forward-looking provisions that aim to gradually increase corporate diversity to benefit a broader range of stakeholders. It also discusses the role of shareholder and employee activists as mechanisms to pressure companies to improve diversity under both the proposed regime and the current Nasdaq/SEC “disclose or explain” rule.

1.  ESG, which has its origins in the United Nations’ environmental movement, is about integrating environmental, social, and governance issues into business. For an excellent discussion about the origins and ambiguity around the term ESG, see Elizabeth Pollman, The Making and Meaning of ESG 20–29 (Inst. L. & Econ., Working Paper No. 659, 2022). ↑
2.  Thompson Hine, An ESG Snapshot: Survey Confirms Companies Are Responding to Increasing Expectations 5 (2021), https://admin.thompsonhine.com/wp-content/uploads/202‌2/04/An_ESG_Snapshot.pdf [https://perma.cc/VHV7-9SE8]. Public companies are more likely to disclose ESG matters than private companies. L. Emily Hickman, Information Asymmetry in CSR Reporting: Publicly-Traded Versus Privately-Held Firms, 11 Sustainability Acct., Mgmt. & Pol’y J. 207, 219 (2020). ↑
3. Survey after survey reveals that employees, customers, and the public all want companies to encourage or prioritize workplace diversity and inclusion. See, e.g., Susan Caminiti, Majority of Employees Want to Work for a Company that Values Diversity, Equity and Inclusion, Survey Shows, CNBC: Workforce Wire (Apr. 30, 2021, 3:12 PM), https://www.cnbc.com/2021/04/30/diversity-equity-and-inclusion-are-important-to-workers-survey-shows.html# [https://perma.cc/8NPJ-HZH8]; Shelby Jordan, 64% of Consumers Consider Making an Immediate Purchase After Seeing Diverse Advertisements, New Data Shows, PR Newswire (Nov. 11, 2020), https://www.prnewswire.com/news-releases/64-of-consumers-consider-making-an-immediate-purchase-after-seeing-diverse-advertisements-ne‌w-data-shows-301170981.html [https://perma.cc/5XHT-KECK]; Victoria Petrock, Consumers Expect Brands to Be Inclusive, Insider Intel. (Nov. 25, 2020), https://www.emarketer.com/content/consumers-expect-brands-inclusive [https://perma.cc/D‌M29-8H9G]; Juliana Menasce Horowitz, Americans See Advantages and Challenges in Country’s Growing Racial and Ethnic Diversity, Pew Rsch. Ctr. (May 8, 2019), https://www.pewresearch.org/social-trends/2019/05/08/americans-see-advantages-and-challe‌nges-in-countrys-growing-racial-and-ethnic-diversity/ [https://perma.cc/X568-XDGJ] (reporting that 75% of Americans say it is very or somewhat important for companies to promote racial and ethnic diversity in their workplace). ↑
4. Sean O’Neill, What is the Difference Between CSR and ESG?, Corp. Governance Inst. (July 6, 2022), https://www.thecorporategovernanceinstitute.com/insights/lexicon/what-is-the-difference-between-csr-and-esg [https://perma.cc/R7QY-D8VL]. ↑
5. See infra notes 31–36 and accompanying text. ↑
6. Ronald Chen & Jon Hanson, The Illusion of Law: The Legitimating Schemas of Modern Policy and Corporate Law, 103 Mich. L. Rev. 1, 35 (2004). ↑
7. A.A. Berle, Jr., Corporate Powers as Powers in Trust, 44 Harv. L. Rev. 1049, 1049 (1931). ↑
8. E. Merrick Dodd, Jr., For Whom Are Corporate Managers Trustees?, 45 Harv. L. Rev. 1145, 1158–61 (1932). ↑
9.  Milton Friedman, A Friedman Doctrine—The Social Responsibility of Business is to Increase Its Profits, N.Y. Times (Sept. 13, 1970), https://www.nytimes.com/‌1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html/ [https://perma.cc/6VKK-MWZV]. ↑
10. See Jill E. Fisch & Steven Davidoff Solomon, Should Corporations Have a Purpose?, 99 Tex. L. Rev. 1309, 1309 (2021); Mark J. Roe, Corporate Purpose and Corporate Competition, 99 Wash. U. L. Rev. 223, 223–25 (2021); Tom C.W. Lin, Incorporating Social Activism, 98 B.U. L. Rev. 1535, 1537–38 (2018); Margaret M. Blair & Lynn A. Stout, A Team Production Theory of Corporate Law, 85 Va. L. Rev. 247, 249–51 (1999); David Millon, Essay, New Game Plan or Business As Usual? A Critique of the Team Production Model of Corporate Law, 86 Va. L. Rev. 1001, 1001–03 (2000); Ronald M. Green, Shareholders as Stakeholders: Changing Metaphors of Corporate Governance, 50 Wash. & Lee L. Rev. 1409, 1409–14 (1993); Oliver Williamson, Corporate Governance, 93 Yale L.J. 1197, 1197–1200 (1984). ↑
11. Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy that Serves All Americans’, Bus. Roundtable (Aug. 19, 2019), https://www.business‌roundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans [https://perma.cc/4UTS-ABFF]. ↑
12. See, e.g., Dorothy S. Lund, Corporate Finance for Social Good, 121 Colum. L. Rev. 1617, 1619–20 (2021). CEOs from 181 companies representing some of America’s largest companies signed the declaration. Bus. Roundtable, supra note 11. ↑
13. Civil Rights Act of 1964, Pub. L. No. 88-352, §§ 703–704, 78 Stat. 241, 253–59; Equal Employment Opportunity Act of 1972, Pub. L. No. 92-261, 86 Stat. 103. ↑
14. See, e.g., Regents of Univ. of Cal. v. Bakke, 438 U.S. 265, 313 (1978) (concluding that universities might use race as one factor among others to promote the “robust exchange of ideas” that might flow from a racially diverse academic community); see also Ellen Berrey, The Enigma of Diversity: The Language of Race and the Limits of Racial Justice 27, 196–97 (2015) (discussing the development of diversity management in the late twentieth century). ↑
15. Catherine Cote, What is a CSR Report and Why is it Important?, Harv. Bus. Sch. Online (Apr. 20, 2021), https://online.hbs.edu/blog/post/what-is-a-csr-report [https://perma.cc/6XK9‌-SL6M]. ↑
16. See, e.g., Cynthia A. Williams, The Securities and Exchange Commission and Corporate Social Transparency, 112 Harv. L. Rev. 1197, 1199–1201 (1999); Russell B. Stevenson, Jr., The SEC and the New Disclosure, 62 Cornell L. Rev. 50, 50–59 (1976); Douglas M. Branson, Progress in the Art of Social Accounting and Other Arguments for Disclosure on Corporate Social Responsibility, 29 Vand. L. Rev. 539, 575–76, 581 (1976); Theodore Sonde & Harvey L. Pitt, Utilizing the Federal Securities Laws to “Clear the Air! Clean the Sky! Wash the Wind!”, 16 How. L.J. 831, 834–35 (1971); David Hess, Social Reporting: A Reflexive Law Approach to Corporate Social Responsiveness, 25 J. Corp. L. 41, 42–46 (1999); Janet E. Kerr, The Creative Capitalism Spectrum: Evaluating Corporate Social Responsibility Through a Legal Lens, 81 Temp. L. Rev. 831, 846 (2008); Thomas Lee Hazen, Social Issues in the Spotlight: The Increasing Need to Improve Publicly-Held Companies’ CSR and ESG Disclosures, 23 U. Pa. J. Bus. L. 740, 741–47 (2021); Daniel C. Esty & Quentin Karpilow, Harnessing Investor Interest in Sustainability: The Next Frontier in Environmental Information Regulation, 36 Yale J. on Regul. 625, 625–28 (2019). ↑
17. See, e.g., Jeffrey Meli & James C. Spindler, The Promise of Diversity, Inclusion, and Punishment in Corporate Governance, 99 Tex. L. Rev. 1387, 1387–93 (2021); Lisa M. Fairfax, Board Diversity Revisited: New Rationale, Same Old Story?, 89 N.C. L. Rev. 855, 855–59 (2011) [hereinafter Fairfax, Revisited] (criticizing the overreliance on business justifications for diversifying corporate boards); Lisa M. Fairfax, The Bottom Line on Board Diversity: A Cost-Benefit Analysis of the Business Rationales for Diversity on Corporate Boards, 2005 Wis. L. Rev. 795, 796–99 [hereinafter Fairfax, Bottom Line]. The exception is Veronica Martinez & Gina-Gail S. Fletcher, Equality Metrics, 130 Yale L.J.F. 869, 869, 875 (2021), which addresses the role of diversity disclosures but in the context of shareholder transparency and decision making. ↑
18. See infra Section I.C and accompanying text. ↑
19. See generally Williams, supra note 16, at 1205–07 (arguing that the SEC has the authority to require expanded disclosure and should use this authority to ensure “corporate social transparency”); Stevenson, supra note 16, at 58–62 (explaining and rebutting the SEC’s reluctancy to use its authority to require the disclosure of policies related to social goods); Branson, supra note 16, at 631–34 (discussing Judge Charles Richey’s perspective on the SEC’s authority to require social responsibility disclosure); Sonde & Pitt, supra note 16, at 835–36 (discussing the SEC’s opportunity to “help promote the nation’s environmental policy” through disclosure requirements related to the National Environmental Policy Act); Paul G. Mahoney & Julia D. Mahoney, The New Separation of Ownership and Control: Institutional Investors and ESG, 2021 Colum. Bus. L. Rev. 839, 843–45 (cautioning the SEC against adopting ESG disclosure mandates). ↑
20. See Cathy Hwang & Yaron Nili, Shareholder-Driven Stakeholderism, U. Chi. L. Rev. Online (Apr. 15, 2020), https://lawreviewblog.uchicago.edu/2020/04/15/shareholder-driven-stakeholderism-hwang-nili/ [https://perma.cc/7FTT-RYGP]; Andrew J. Hoffman, A Strategic Response to Investor Activism, 37 Sloan Mgmt. Rev. 51, 51 (1996); Michal Barzuza, Quinn Curtis & David H. Webber, Shareholder Value(s): Index Fund ESG Activism and the New Millennial Corporate Governance, 93 S. Cal. L. Rev. 1243, 1265 (2020); Stavros Gadinis & Amelia Miazad, Corporate Law and Social Risk, 73 Vand. L. Rev. 1401, 1464 (2020). ↑
21. 15 U.S.C. § 78s(b)(1); 17 C.F.R. § 240.19b-4 (2006). ↑
22. Underrepresented minority is defined as identifying as Black (or African American), Latinx, Asian, Native American, Alaska Native, Native Hawaiian, Pacific Islander, or a combination of multiple of these ethnicities; LGBTQ+ is defined as an individual who “self-identifies as any of the following: lesbian, gay, bisexual, transgender, or as a member of the queer community.” Order Approving Changes to Listing Rules Related to Board Diversity, 86 Fed. Reg. 44424, 44424–25, 44425 n.18 (Aug. 6, 2021). The SEC itself is looking to propose its own board diversity disclosure regulations for companies and may include disability status in its rules. See Lydia Beyoud & Andrew Ramonas, Disability Advocates Seek Inclusion in SEC Board Diversity Rules, Bloomberg L. (Sept. 30, 2021), https://news.bloomberglaw.com/‌esg/disability-advocates-seek-inclusion-in-sec-board-diversity-rules [https://perma.cc/3Z7W-H2KD]. ↑
23. Order Approving Changes to Listing Rules Related to Board Diversity, 86 Fed. Reg. at 44428. ↑
24. The ESG Disclosure Simplification Act was passed as part of the Corporate Governance Improvement and Investor Protection Act, H.R. 1187, 117th Cong. (as passed by House, June 16, 2021). The Bill was originally introduced in the House as the ESG Disclosure Simplification Act (“EDSA”) on February 18, 2021. 167 Cong. Rec. H535 (daily ed. Feb. 18, 2021). ↑
25. H.R. 1187 § 603. The Act would also require companies to disclose their environmental and climate risk mitigation measures. Id. § 403. ↑

26. See Atinuke O. Adediran, Disclosures for Equity, 122 Colum. L. Rev. 865, 873–74 (2022) (explaining how to use disclosures to reach racial equity ends). ↑