Together, these new laws create an uneven regulatory patchwork that has already resulted in the divestment of billions of dollars in state funds from investment managers. Investors and businesses increasingly face a choice between complying with these new state laws and achieving the ESG goals promised to investors and stakeholders. New laws introduced in 2023 expand the scope of anti-ESG laws and present significant uncertainty for an increasing range of businesses.

Fiduciary duties & non-pecuniary factors

Federal regulators and conservative lawmakers in some states are taking opposing approaches to defining the duties of fiduciaries. Investors making decisions using ESG frameworks include factors such as greenhouse gas emissions, which go beyond traditional fiduciary criteria like return on investment. The conflict reflects a philosophical disagreement between the belief that companies should work only to maximize returns, on one hand, and consideration of the interests of a wider range of stakeholders and outcomes, on the other.

In 2022, the U.S. Department of Labor (DOL) released a final rule addressing when fiduciaries may consider ESG factors in accordance with their fiduciary duties under the Employment Retirement Income Security Act of 1974 (ERISA). Under ERISA, retirement plan fiduciaries have a duty to act solely in the interest of plan participants and beneficiaries. The new rule clarifies that fiduciaries may consider ESG factors such as climate change and may select from competing investments based on collateral economic or social benefits. In late-January, 25 states filed a lawsuit in federal court seeking an injunction against the new rules.

Even before the release of the DOL final rule, several states proposed laws prohibiting the use so-called “non-pecuniary factors” in making investment decisions for state pensions and other funds. Earlier in 2022, the American Legislative Exchange Council introduced the State Government Employee Retirement Protection Act, model legislation that closely mirrors fiduciary duty bills later introduced in several states.

On March 24, Kentucky Governor Andy Beshear (D) signed House Bill 236 into law. Under the statute, “environmental, social, political, or ideological interests” not connected to investment returns may not be included in determining whether a fiduciary or proxy of the state retirement system is acting solely in the interest of the members and beneficiaries. Five non-exclusive factors, including statements of principles and participation in initiatives, are listed as evidence a fiduciary has considered or acted on a non-pecuniary interest.

In 2023, legislators introduced fiduciary duty laws of varying scope in several large states, including Ohio and Missouri. In total, legislators in more than 20 states have introduced bills amending the fiduciary duty laws covering investing and proxy voting for state retirement systems.

To further complicate matters, state pension funds in states like New York and California take the opposite approach, setting net zero carbon targets for their portfolios, for example.

ESG as boycott

Conservative politicians often claim ESG uses economic power to enact political agendas through alternative means. They argue goals like decarbonization amount to a boycott of fossil fuel companies and are a threat to the economies of states dependent on the extractive industry. New legislation expands on previous anti-boycott laws to include targeting companies that consider ESG factors.

Several states have already started the process of divesting retirement system and other funds from financial companies they claim boycott fossil fuel companies. For example, a 2021 Texas law requires the State Comptroller to publish a list of boycotting companies. The Comptroller’s initial criteria for inclusion included membership in Climate Action 100 and the Net Zero Banking Alliance/Net Zero Asset Managers Initiative, two major financial industry initiatives focused on climate change.

Utah Governor Spencer Cox (R) signed a bill into law on March 15 that goes beyond state investments to prohibit companies from coordinating or conspiring with another company to eliminate viable options for another company to obtain a product or service “with the specific intent of destroying a boycotted company.” A boycotted company is defined by the law as one that engages in aspects of the firearms industry or does not meet certain ESG standards.

Social Credit scores

Speaking in support of the Utah anti-conspiracy bill, state Rep. Mike Petersen (R) said: “I’m convinced that ESG is not a conspiracy theory, it is a conspiracy truth.” To many of its opponents and skeptics, ESG is an unaccountable shadow regulatory system that takes specific aim at industries and policies supported by conservatives.

The belief that the stated goals of ESG mask other motives is at the source of bills introduced in several states to prohibit financial institutions from using a “social credit score” to make lending or other decisions and defining the term to include ESG. The language invokes the Social Credit System in use in China, which monitors and punishes individuals and businesses for certain behaviors and serves as a type of blacklist.

Though some ESG frameworks produce numerical scores for various metrics, the comparison to the Social Credit System is rejected by ESG experts. There is no substantive overlap between China’s surveillance apparatus and ESG in goals or application.

This distinction has not dissuaded lawmakers in Florida, who enacted legislation amending state banking law to make the use of social credit scores by lenders an unsafe and unsound practice in violation of state financial institutions codes and unfair trade practices laws, subject to sanctions and penalties. The law prohibits the use of a social credit score based on factors that include, among other things, ESG standards on topics including emissions and corporate board diversity.

The Florida bill and others like it expand previous efforts by the state to divest state funds to restrict decisions on private lending, potentially involving many more financial institutions.

On the horizon

The volume of anti-ESG bills introduced in state legislatures is growing. Many are passing as the topic gains political salience, particularly on the political right. As these laws pass, they serve as models for similar legislation in other states. However, the success of future legislation faces significant headwinds.

Anti-ESG laws have been passed predominantly in states where Republicans control the governorship and both houses of the legislature. So far, there is little indication many Democrats will support these anti-ESG laws. Indeed, the growing scope of anti-ESG laws pose another roadblock to their widespread adoption. Newer laws impose restrictions on a much broader range of companies, which only increases the complexity of enforcement and increases the risk of a legal challenge.

A lack of uniformity means businesses operating in more than one state may have to make difficult choices. The broader economic consequences of anti-ESG laws are still undetermined, but compliance with these new laws presents immediate challenges.

Today, women in the legal profession find that it is critical to support one another and to collaborate to achieve success. Cullinan’s article further states that her findings show “women are more likely to care for the collective”, and that “women are less likely to carve out time during the workday to focus on their top priorities, because they feel guilty or selfish for doing so. (Research that indicates guilt is typically a female trait supports this finding.) If women do carve out time, they tend to give it away if someone needs them.”

Not surprisingly for many women, law firms’ women’s initiatives have helped to facilitate collaboration and support for women seeking to advance their careers in legal.

Christy Crider, Chair of both the Women’s Initiative and the Healthcare Litigation Group at Baker Donelson as well as a member of the firm’s board of directors, notes the strategic importance Baker Donelson places on advancing women. “The Women’s Initiative has a robust strategic plan honed over the last 10 years and a Women’s Initiative Leadership Team made up of nearly 50 seasoned women and men attorneys and business professionals who are passionate about advancing women,” Crider says.

“In understanding that a large book of business is the quickest way to advance, we developed our groundbreaking and award-winning Women to Equity program six years ago,” she explains. “In the year-long program, we take a class of 14 women income-shareholders who are looking to make equity-shareholder in the next 3-4 years. Throughout the year, we have programming led by equity-shareholders, firm leaders, and coaches on topics related to building a book of business — such as identifying targets, collaborating, selling your expertise across the firm, and how to turn a single matter into a career-long client.”

Many law firms have women’s initiatives as well as diversity, equity & inclusion (DEI) initiatives; and leaders of these groups have discussed the many challenges still faced by individuals including:

• • • compensation models not set up for sharing credit;
    • partners passing on their clients to favored young (and often white male) associates who have been groomed to take over the client;
    • lack of billable time allowance for managing women’s initiatives; and
    • lack of collaboration by those who have succeeded before them.

In other words, while the firm may have the best intentions with establishing these initiatives, until they become part of the strategic fabric of the firms and credit is given to those who spearhead and manage these initiatives, the emphasis will remain on billable time and origination. This dynamic unfortunately results in a loss of the opportunity to create a diverse, inclusive, and collaborative environment that ultimately benefits all members.

Encouraging camaraderie

Still, many firm members find camaraderie among their peers. Brownstein Hyatt Farber & Schreck’s Carrie Johnson, a shareholder and Chair of the firm’s Women’s Leadership Initiative, says that her “professional life is full of smart, dynamic, supportive women who want to see other women succeed. I know some women haven’t had the same experience, but I spend my days surrounded by women who do what they can to lift others up, and I am grateful for it.”

Is it easier to do business with women buyers of legal services? It may be, several suggest. “Women are very often oriented toward solving problems rather than approaching issues as a zero-sum game of winning or losing,” Johnson says.

Baker Donelson’s Crider adds that she’s experienced “no difference in the ease or difficulty of doing business with clients based on their gender. The key in either situation is to listen and continue to ask questions to ensure you are giving the client exactly what they need now and in the future.”

Cullinan’s article discusses other interesting findings. She writes:

Researcher, consultant, and author Pam Heim has studied gender differences and has published her findings in several books. Her research uncovers an important difference in the way men and women view collaboration. She found that women are more likely to agree with the statement ‘Being a good team player means helping all of my colleagues with what they need to get done.’ In contrast, men are more likely to agree with the statement ‘Being a good team player is knowing your position and playing it well.’ In organizations that get work done through informal project teams or that have overlapping accountabilities, this difference in perspective has implications for the way the men and women engage in collaboration.

Some of the challenges women today face with business development include time, of course, which is often everyone’s greatest challenge. “Balance is the goal that eludes women attorneys from the most junior attorney to the most seasoned rainmaker,” Crider says. “There are so many pulls on our time. With the encouragement of a great mentor, women, in my experience, can intuitively develop business.”

Finding the time

The challenge, of course, is finding the time to create those business development opportunities — too often other tasks will grab time jealously while forming business development strategy will not. For all lawyers, it takes intention and ruthless, consistent execution to be successful in developing business — and that can be very difficult with the competing time demands on all of us, she adds.

Other challenges we face, adds Brownstein Hyatt’s Johnson, stem from the fact that “most decision-makers are older men. While many are happy to hire women, there’s still fundamentally a headwind involved in not seeing people like me reflected in the client base.”

Today however, more corporations are aware of their demands of outside counsel for diverse teams and that they themselves need to follow their own advice. “We agree we need to do a better job of i) building our own diverse teams, and ii) hiring more outside counsel who are diverse,” explains a diverse member of Google’s in-house counsel. “We are all working toward collaborating outside the historic norms and being more inclusive of women and minority counsel.”

In fact, some law firms are holding in-house counsel responsible for following through on their often-lengthy RFPs which demand painstaking disclosure about staffing of women and minority counsel. “Change is happening, it’s just very slow,” the in-house team member adds.

And focusing on collaboration certainly helps guide the process. But in order to that, it’s important to recognize that success here is a two-way street. “It is important to seek out the perspectives of both women and men,” says Crider, adding that men have been equally great mentors throughout her career. “The most successful mentoring relationships I have had are reciprocal — in other words, we are in this to help one another. In the relationships where I am in more of a traditional mentoring role to a junior attorney, I appreciate the mentees who take the time to support me as well — those have star power.”

To realize the gains offered by collaboration across diverse teams, it takes leadership and commitment. Creating an environment where everyone matters, and everyone works to support each other’s success will certainly benefit law firms in the long run. And most certainly, those women who support other women will help drive this success.

“Any organization has two manifestations: the formal organization with its rules, procedures, and organizational diagrams, and ‘what actually happens’,” said Dr. Roger Miles, faculty lead of the banking industry body U.K. Finance’s conduct leaders’ academy and a researcher and consultant on behavioral risk.

“Discovering the latter exposes problems and risks but senior managers often have a determinist view and wrongly assume that what their rules say is what everyone does,” Miles noted.

Hybrid working hiding problems

Hybrid working became normal practice at many firms as the COVID-19 pandemic wound down. Staff liked being spared a commute and enjoyed the greater flexibility to accommodate childcare and other needs. And many firms saw the potential to reduce the amount of expensive office space that they rent.

Hybrid working remains popular with employees. With people no longer in the same place at the same time, managers depend on video-conferencing platforms such as Zoom, Webex and Microsoft Teams; however, without the necessary management skills, problems can go unnoticed or unchecked.

“In online meetings, you lack important clues — body language, other visual signs, conversational nuances, significant silences — that would tell people in the same room someone’s holding back their true opinion or has some other difficulty,” Miles said.

“It’s easier to query something in person, especially when you sense that somebody else may support you,” he added. “Virtual working can mean more doubts are suppressed, which is the opposite of the ‘speak up’ culture” that the United Kingdom’s Financial Conduct Authority (FCA) expects.

SVB & operational risk

Failure to challenge matters online has been suggested as a factor in the collapse of Silicon Valley Bank (SVB) because underlying causes included unhedged risks from rising interest rates, a narrow client base, and a sudden pullout of deposits. However, some flagged SVB’s enthusiastic adoption of remote working, which most staff enjoyed. A Financial Times report mentioned the difficulty of challenging decisions like interest rate risk over Zoom.

SVB’s 2023 annual report, released in February, acknowledged that its work-from-home (WFH) arrangements created operational risk. The report said the negative effects of WFH that SVB could experience included systems access problems, cybersecurity or information breaches, and work-life balance problems reducing productivity or causing significant business operations disruptions.

From the C-suite to call centers, hybrid working risk-reduction is not helped by the way many managers in finance are developed, and the focus often is on performing a role, not how to oversee others. Research by the Chartered Management Institute (CMI), found that despite the prevalence of managing via online channels, there was scant training for it.

Lack of training, online meetings where most attendees keep their camera and mic off unless called to contribute, and a subconscious ‘familiarity breeds contempt’ attitude creates problems. Sensitive online meetings can be overheard as people take calls in coffee shops, while walking dogs, or on a train. Hybrid working may also contribute to the use of unauthorized messaging services for work.

Further, hybrid working affects staff development and meeting FCA training and competence requirements, as in-person instruction entails getting the instructor and trainee into the office on the same day. Anecdotally, one problem is that upper-middle tier managers at some firms can be absent even on core office days. The FCA’s expectations regarding remote or hybrid arrangements require firms to take into account the possible detrimental impact on training, and there are clear shortcomings.

“We all learn in unconscious ways, and seeing your manager operate on a day-to-day basis in person will undoubtedly influence how we learn at work,” said Anthony Painter, director of policy at CMI. “A survey of managers late last year asked about onboarding new employees, and 7-in-10 told us they found onboarding new team members and building relationships at work harder in a hybrid work setting.”

Pushback from firms

The Lloyd’s insurance market is among those pushing back against three days in work patterns and wants Monday restored as an office day, ideally aiming for full-time attendance. Some investment banks always viewed hybrid working as an unloved post-lockdown necessity that got staff back in the office at least part-time without triggering mass resignations in a tight labor market. With economic conditions harder, firms’ attitudes started stiffening last autumn.

Staff resistance to full-time attendance may thwart firms. Several banks have repeatedly told employees to be in the office full-time since late 2020, but logic would dictate that you do not have to keep ordering people to do something if they are already not doing it. A report last August found that over one-third of staff at London law firms, and nearly half in North America, had ignored calls for greater office attendance with firms reluctantly conceding on the issue.

A call back to the office can weed out those abusing the concept of being managed remotely — sometimes referred to as ZEUS workers, meaning those who put in zero effort unless supervised. One company recently paid staff a lump sum towards the travel costs of returning full-time; later, non-attendees’ excuses included spending the money on clothes and disliking commuting approximately five miles. Another non-attendee who asked whether the firm would install air-conditioning first had to be reminded the office had always had it.

Reluctance to return to the office can indicate serious diversity and cultural problems as well, as it may really be about avoiding unpleasant people. Last month, a recruitment company reported that workers over 55 years old were the most likely to experience deliberate exclusion by colleagues. Women over 45 were twice as likely to face sexist behavior than younger ones and one-third had been bullied.

“If your colleagues are deterred from coming to the office because of a hostile environment, you have bigger problems than the balance between in-person or remote working,” Painter said. “Such a culture is fundamentally corrosive and will impact the well-being and performance of your staff. It will also exclude many talented people, whether over 45 or under 45.”

Other workers may find the office less attractive now that fewer people are there. In March, CMI research reported that 52% of managers found WFH meant workplaces, especially at larger firms, were lonelier; and 47% found work more stressful than in pre-pandemic times.

In these situations, it is easy to be intimidated and feel pressure to assimilate our point of view to the larger more homogeneous group. If we do, however, we are missing a real opportunity. Instead, we should embrace that opportunity and share our unique perspective with the larger group.

The impact of a diverse team

Consider the purpose of being on a team. Some leaders are drawn to pulling together individuals that think, look, and act like other successful individuals. Their intention is to repeat prior success by selecting team members with similar attributes, or foster harmony by having a team of people who may all act alike. However, the purpose of a team is to bring together people with different strengths, so the team is stronger by functioning together rather than by operating as individuals. If everyone on the team is a good strategist but no one is skilled at execution, the team will struggle to deliver what they promised.

As the discussion of diversity, equity, and inclusion (DE&I) continues to mature, there is a greater realization around the impact that diversity has on teams and organizations. For example, McKinsey & Company has been studying the impact on diversity within organizations over several years. Its 2019 findings showed that companies that incorporated gender diversity on their executive teams had a 25% greater chance of above-average profits — a 10-percentage-point increase from its 2014 findings. And when executive teams included ethnic diversity, they had a 36% greater chance of outperforming other organizations.

These results are achieved when organizations make an effort to increase their diversity, and when those being included speak up and the leaders listen. It takes time for diversity to spread through companies, and the data shows it is happening at a slow rate. This means when we are given opportunities in which we are the only team member that is a woman, a person of color, younger, or who identifies as LBGTQIA+, we have the obligation to bring our strengths and insights into the conversation.

The confidence to speak up

February was Black History and Women’s History months, and those months we were reminded of stories of those who forged new paths. Whether they were the first black or woman that broke through barriers, their background and values generated ideas in them that no one else had. They didn’t give up on their convictions because no one else could see it or because they looked different. They worked to get a seat at the table, or made their own seat, so they could make a difference.

A recent example is Phyllis Newhouse, founder and CEO of Xtreme Solutions. In 2002, she became the first black woman CEO of a cybersecurity company, and about seven years later she was the first black woman CEO of NYSE-listed SPAC [Special Purpose Acquisition Company]. She describes her career path as being the “Only” black woman in the room, and she learned how to “play the game” by observing and engaging mentors. Newhouse has shared her experiences, saying “…if you understand the game, even as an Only, you get to play it — but it requires courage, strategy, confidence, and understanding.”

Part of building the individual confidence necessarily comes from awareness of your strengths, what makes you distinct, and how you can add value. For those who are still working on identifying these attributes, the Marcus Buckingham Company developed an assessment called StandOut Strengths. In an interview, Buckingham described StandOut as “…a way for us to see one another — and not through the lens of gender, race, intellectual accomplishment, or level in the company. Rather, we can see each other through one’s positive natural pattern, which you can call their strengths.”

As we all work together to create greater diversity and inclusion and equity, in our organizations, it’s important to be good shepherds of when we are the Only, as Newhouse described.

Realize the team will perform better when diverse backgrounds, perspectives, and values are shared during discussion and planning, and this in turn will make the organization richer — figuratively and literally — when diverse voices are heard.

In fact, law firm leaders recently have described the delicate dance that needs to be done when the firm is representing clients that could be on opposing sides of an issue in matters that have nothing to do with each other. The new term for these situations is corporate political responsibility, which is when an organization takes a stance on particular topics that are happening right now.

Gayatri Joshi, former executive director of the Law Firm Sustainability Network and Partner at Vorgate Legal ESG Impact, says she sees the pressure law firms and other legal organizations are facing around corporate political responsibility increasing in 2023, citing the responses by many law firms in early 2022 to the Russian invasion of Ukraine as evidence that this pressure is already happening.

One head of sustainability at a law firm commented how some of its largest clients are asking the firm to agree with its public statements on an issue.

Another aspect of this is the pressure that some law firms are getting from their own clients, which may prefer that their suppliers to be on the same side of an issue. One head of sustainability at a law firm commented how some of its largest clients are asking the firm to agree with its public statements on an issue.

Still, another difficult element is how to navigate potentially opposing views between employee groups and clients. Activism among stakeholder groups is increasing; for example, a law firm might have a group of employees who are passionately advocating for the firm to reduce its carbon footprint while it’s also representing a company in the fossil fuel industry in a transactional matter.

Whatever the specific circumstances, pressure from stakeholders on alignment in values is increasing and unlikely to change direction any time soon. Organizations need to be smart in how they respond, and many organizations are using these best-practice tactics to do so.

Best ways to navigate politicization of ESG issues

Reframe ESG as part of business efficiency — Make the case that ESG boils down to smart business. In many respects, depoliticizing ESG is an expanded SWOT analysis that seeks to widen the lens of enterprise risk and opportunities.

In 2019, the Business Roundtable, an association of chief executive officers (CEOs) of America’s leading companies, re-defined the purpose of a corporation in a public statement signed by 181 CEOs saying that corporate leaders should be committed to operating their companies in a way that benefits all stakeholders, including customers, employees, suppliers, local communities, and shareholders.

This shift from shareholder value to stakeholder capitalism was important because the statement expanded a corporation’s purpose beyond shareholder primacy, a directive that had been around since the 1970s.

Today, stakeholder capitalism is analogous to ESG in many ways. Indeed, ESG or sustainability might be the name du jour, but essentially, business measures of performance, success, efficiency, and effectiveness across stakeholder groups are well established and pretty consistent whether a company has a formal ESG strategy or not.

Employ holistic stakeholder listening and align responses to corporate values — Understand that the landscape and navigation of thorny issues will continue and perhaps get even more precarious. The best way forward is through authentic listening with individual stakeholders.

“The guidance I give is to relate these issues on how it is going to affect someone and what the corresponding action plan is,” Joshi says. “If your client happens to be on the opposite side of an issue, they can respect that you were following up directly to the stakeholder group that communicated that the issue was important.”

“Demagoguing is happening. But when you look at the individual elements in [ESG], it’s very hard to actually find reasons why you should not support it.”

For example, one law firm leader recently shared how their firm used this tactic in the aftermath of the Dobbs decision, which effectively struck down abortion rights on a federal level. The firm immediately was pushed by its younger employees to take a public stance. And while the firm did not take a public stand on Dobbs, it did respond with authenticity to feedback from one of its key stakeholder groups — its younger talent — in a myriad of ways.

Should a client have expressed dissatisfaction on the firm’s actions, the firm could then point to how it’s aligning to its values as an employer that relies heavily on high-quality talent. In that role, the firm seeks to provide a culture of care that actively listens to its employees. While a particular client may not agree with the firm’s actions, it can respect the fact that the law firm listened and responded as part of its commitment to support employees and continue to attract and retain key talent.

Drill down into the details — Polarization around ESG is real, and in many cases, it is blowback to progress. Examining a specific issue, such as greenhouse gas reduction or corporate governance, within ESG can be an effective way through the murkiness. Indeed, there is general acceptance of climate risk and the need for diversity to produce better business performance.

“Demagoguing is happening,” says R Mukund, CEO of Benchmark ESG. “But when you look at the individual elements in [ESG], it’s very hard to actually find reasons why you should not support it.”

The intersection of climate change and inequality is reshaping the world, and the social contributions of private sector companies are increasingly part of the expectations and solutions to a just transition for investors, members of communities in which companies operate, and members of civil society. However, myths around the lack of measurement of social impact persist, despite well-known ways of doing so.

Tackling the “S” through investors’ eyes

Investors and the financial sector have been tackling how to account for, measure, and communicate companies’ social impact for a while, according to Bettina Reinboth, Director of Human Rights & Social Issues at Principles for Responsible Investment (PRI), a UN-supported network of institutional investors that promotes responsible investment through the use of sustainability practices. In a recent article, PRI clarified how the UN Guiding Principles on Business & Human Rights set expectations for investors to act on human rights.

Institutional investors, particularly those considered universal owners, maintain a long-term investment horizon. This takes a multi-decade view of how the transition to a sustainable global economy impacts people internally and externally, the main component of the social part of ESG.

Likewise, corporate directors are focusing on holistic employee well-being now in large part because of investors’ demands and the upcoming regulatory requirements to meet their fiduciary and oversight obligations. “Talent is a part of everything an organization does, and we see boards leaning into talent matters with management more than ever,” says Carey Oven, National Managing Partner at Deloitte’s Center for Board Effectiveness. “They are requesting more data around engagement and sentiment and exploring enriching ways to get feedback from the workforce in a much bigger way than they had before.”

Up until a few years ago, companies could get away with having a human rights policy with the expectation of adherence from the top of the organization to the bottom, including board oversight, as important foundational elements. More recently, however, investors’ savvy is increasingly on the rise, and investors are looking for more detailed information about measurement. Some of the more pointed questions on investors’ minds include: i) how actual and potential negative outcomes for people are identified; ii) what due diligence and verification of the adherence to policy and practices are performed; and iii) what is the process for dealing with effective grievance mechanisms.

In part, this is the reason for the spike in investors noting publicly when there is a gap between what a company says it does and what it actually does within ESG.

Culture & well-being as a key measurement of the “S”

The well-being of people is central to the social performance of firms. Investors and now corporate directors are looking for ways to capture social indicators as part of companies ESG strategies. Yet, in order to measure an organization’s social impact, a company must first define its stakeholders, which include employees, consumers, and local communities, including those that may be part of the company’s supply chain.

Because employee well-being is central to that of society, for companies to understand the full scope of how their actions and policies contribute to well-being is important. Critical elements of a comprehensive corporate approach to well-being include: i) aspects about the work itself, and the social interactions that employees have at work; ii) the skills each employee gains through employment; and iii) the sense of purpose from the job experienced by each employee.

In addition, measures of employee inequality, representation, pay, promotion, and overall working conditions are equally important. More specifically, there are many people well-being indicators organizations can use to measure their social impact, according to the Organisation for Economic Co-operation and Development (OECD). These indicators include:

• • • • Employment — such as hiring, turnover, and promotion.
      • Earnings — wages, benefits, executive pay gap, and financial insecurity.
      • Learning & skills — skills obtained on the job and the intersection of work and personal development.
      • Health —absenteeism, mental health, and health & safety in working conditions.
      • Social support — manager effectiveness and trust between workers.
      • Work/life balance — annual leave, parental leave, and average working hours per employee.
      • Employees’ voices & feedback — trust in management, upward feedback of managers, and mechanisms to give employees a voice.

Further, to address the impact on the well-being of local communities and society as a whole, the OECD highlights the following indicators:

• • • • Economic — Taxes paid and revenue generated in each locality.
      • Human — strategic community investment, such as when a company brings its banking relationships to assist in small business funding for local entrepreneurs.
      • Social — board composition and compensation, political contributions, and fines paid.

Analyzing the social risks and impact through lens of well-being of employees and society is one of many ways to measure the “S,” but also a simple and logical one. The interplay between the social impacts during the climate transition will only grow.

Many assume that the expected global economic slow-down will stall sustainability efforts, but PRI’s Reinboth argues the opposite — that progress on sustainability will accelerate based on recent evidence of momentum because of the simultaneous, negative multiple shocks to the well-being of people and society during the global pandemic as the crisis shined a spotlight on the global vulnerabilities and how the social part of ESG intersects with the “E” and the “G” as well.

The COVID-19 pandemic and resulting lockdowns and government closures changed the way we were allowed to communicate, limiting personal contact and requiring the use of all alternative means. Ultimately, this advanced our overall ability to communicate and interact remotely. More than 30 states suspended in-person court proceedings for weeks or months after the pandemic hit in March 2020. New Jersey, Connecticut, Delaware, New Mexico, and Alaska mandated their use; and states including New York, California, and Texas urged use of virtual proceedings while suspending conflicting court rules. The pandemic may have forced government’s hand, but many courts and related agencies rose to the challenge in understanding new ways to use technology to ensure that people’s rights were preserved and protected.

A failure to provide adequate protection of citizens’ rights leads to more than a clogged court. There are civil implications, such as allegations of civil rights violations and expensive court cases. For example, a lawsuit, brought by San Francisco’s public defender against the San Francisco Superior Court on behalf of nearly 400 remanded prisoners goes into details about how defendants’ constitutional rights to a speedy trial could be being violated by delays and backlogs due to an overburdened and technically-stagnant court system.

As pandemic restrictions are lifted, courts must balance the benefits of traditional means of adjudication against valuable opportunities to use more advanced means. Governments must evaluate the merits and protection of rights afforded in both the use of traditional communication and virtual appearances. The goal of the court is to preserve rights, and it has become obvious that a hybrid model (using virtual and in-person options) is the best way to make sure individuals have the most opportunities and options to exercise their rights.

Participation & access are key

One of the major hurdles to access to justice, of course, is participation in the process, which can include transportation issues, childcare, time off of work, and many other issues that some people can afford to take for granted. The use of the courts’ time to issue bench warrants, dismiss for want of prosecution, and entering default judgements only to have to appeal and re-address the same issues, is an inefficient use of the limited funds allocated to the judicial system. Texas Chief Justice Nathan L. Hecht clearly explained this as the “new normal”, saying: “We really are determined to take what we learned in the pandemic and build on it.”

In Arizona, judges and other state court officials reported increases in case participation rates in 2020, which they attributed to the move toward remote proceedings. For example, there was an 8% drop year-over-year in June 2020 in the rate of default, or automatic judgments indicating an increase in participation. In Arizona’s largest county, Maricopa, the failure-to-appear rate for eviction cases decreased from nearly 40% in 2019 to approximately 13% in February 2021.

It is a critical net step for the courts and access-to-justice advocates to evaluate each change that was made in an effort to get through the period of crisis and determine which changes are critical to maintaining a properly functioning court system. While this answer will inevitable be complex, it will ultimately make the justice system better and save time and money. In many states this process has already begun.

In June 2020, the state of New York created the Commission to Reimagine the Future of New York’s Courts, a group of judges, lawyers, academics, and technology experts that is studying how courts operated during the pandemic. In April 2021, the group issued technology recommendations to “improve the efficiency and quality of justice services during the ongoing health crisis and beyond.”

As the nation enters a period of post-pandemic recovery, all government agencies have an obligation to grab hold of the lessons and technological advancements that were brought on by the pandemic and subsequent crisis. Using these lessons to create a more just court system is one way to not waste that crisis and struggle it caused.

The discussion came during The Independent Director Initiative, a two-day program designed to help individuals from under-represented backgrounds land board directorships in venture-backed private companies.

During the session, panelists warned CEOs not to rely solely on their networks or to strictly target C-suite credentials to staff a board. Company leaders need to reevaluate their criteria and methods for filling board seats and broaden their pool of candidates.

“It’s a loss for the companies that can’t see these candidates, and it’s a loss for the prospective candidates who don’t get to bring their expertise into the boardroom,” said Ann Shepherd, co-founder of Him for Her, an organization aimed at addressing women’s under-representation on corporate boards. It’s also a loss, Shepherd noted, for all those stakeholders who are invested in the company.

Search and reach beyond personal networks

Before starting Him for Her, founder Jocelyn Mangan interviewed more than 90 CEOs and sitting directors — all of them men — and found that all filled their last board appointment with someone from their personal network. “It makes sense if you’re filling a board seat to go to people you know and trust,” Shepherd explained, cautioning that such an approach often excludes potential talent, especially among people of color.

The key to disrupting this approach is to “teach boards and teach the people seeking board positions to fish where the fish are,” said panelist Keith Dorsey, an executive recruiter at global search firm Boyden. “There is rarely malice behind executives’ process for filling board seats — it’s just that people don’t know where to find a pipeline of candidates.”

Members of the panel on board diversity, held during the recent “Independent Director Initiative”

Executive search firms can help bridge the gaps between these networks and the diverse candidates that corporations hope to reach, said Dorsey, warning, however, that search firms also need to consider making changes to how they work with aspiring board members. His research showed that women in particular felt some reticence in dealing with old-line executive search firms, where they sometimes felt unheard.

“The talent is out there,” said Ozzie Gromada Meza, vice president of member and talent services at the Latino Corporate Directors Association (LCDA). Meza highlighted the work the LCDA has done amplifying the talents of those pescados — or fish, in Spanish — in the Latino community. When working with potential board candidates, Meza said it’s important that the individual’s mission and values match those of his organization.

Panelist Josh Green, a former venture capitalist and corporate director, said he believes those corporations that are genuinely committed to serving stakeholders are naturally motivated to pursue board diversity. “The principles of stakeholder capitalism give guidance to making that happen,” Green said, explaining that in stakeholder capitalism, companies orient their activities to satisfying the needs of shareholders, employees, customers, and the community in which they operate.

Too often, however, organizations mistake diversity goals for embracing representation — so-called “board washing,” Green noted. And in those situations, diversity candidates must be prepared to ask the hard questions of the interview panel and even step away, if necessary, he added. “If you truly see a focus and devotion to stakeholder capitalism principles, then I think it becomes of interest.”

Find your “you-sized” hole on a board

Seeking out diversity also means considering candidates with experience and skills outside of the CEO and CFO to other executives in the C-suite, panelists explained. “What we have to do a little bit differently right now is challenge those boards as to why they’re seeking yet another CEO or CFO,” said Dorsey. “If you have nine [board] slots and you currently have eight CEOs or CFOs today, what are you hoping to get from a ninth?”

Companies must look to other executives to find the skills that today’s rapidly changing business world demands, Shepherd said. She urged board hopefuls to evaluate and highlight their competency in a few key areas — such as functional and industry expertise, customer and business model experience, and scale — and then explain their specific value to boards.

Overall, panelists said that board seekers should do their homework and determine which of their favorite companies would be the best fit for their own skill set. “Clean up your LinkedIn, do your homework, and develop your value proposition by looking at the skills needed on several of your favorite boards,” Meza explained.

Beyond that, candidates should “know that you have a story to tell,” he added. Relying too heavily on the resumé gives short shrift to human elements that can make certain candidates more relatable. “How you deliver your message is going to be super-key,” he said. “It’s a brand thing that you’re trying to build, so just be very cognizant of that.”

When it comes to the mechanics of securing a board position and serving as a director, the panelists offered advice on everything from advisory roles to knowing the right time to leave. Fit is important, panelists advised, especially in the areas where boards typically focus — management, service, and governance.

In the end, “it’s all about serendipity… and finding the board with the you-sized hole in it,” Shepherd observed.

The issue of toxic behavior in law firms, tax & accounting firms, and corporations is a cause for concern among diversity, equity & inclusion (DEI) advocates and other professionals because it means that roughly one-third of employees within these organizations are experiencing a lack of inclusion and belonging.

However, some believe the current paradigm of DEI with its top-down approach and its priority on individuals with a single underrepresented identity will not adequately address this type of systemic exclusion, while others believe in an integrated strategy of all three components with an increased focused on belonging.

Problems with the current ways DEI is framed

Stephanie Felder, Director of Professional Development and Diversity at Groom Law, is a proponent of the combined approach. “I don’t think it’s quite that black & white as the need to focus on diversity versus belonging,” says Felder. “Both are important, but until you level the playing field and eliminate the exclusionary practices, processes, and systems within your organization, you can’t actually build diversity or belonging.”

Helen May, Director of Belonging@Work, is one of those who calls for an overhaul in assessing and addressing issues of belonging and inclusion based on the human experience. Organizations and human resources in the years leading up to the pandemic evolved to emerge as “bureaucratically diluted of the human element, including diversity and inclusion,” she explains, adding that the current DEI paradigm causes greater division because of the prevalence on setting and achieving targets and too much focus on “othering” large sets of people.

By focusing on a single underrepresented identity, many white men feel othered even as those with underrepresented identities already feel othered in the current environment. In addition, the current DEI approach does not sufficiently address intersectional needs of those with more than one underrepresented identity.

Another challenge concerning the current DEI paradigm is that it is driven mainly in a top-down manner rather than from the bottom upward though the organization. When approached primarily through a top-down perspective, the root causes of what is driving a sense of exclusion are difficult to identify, says May. Because a lack of belonging tends to stem from exclusive behaviors by individuals from both majority and minority groups, it is hard to work out exactly where within management the sources of the issues are occurring, she argues.

Pursuing inclusion through a belonging lens

May advocates for a revised approach to inclusion through the lens of belonging and well-being that uses human-focused questions as a starting point. These questions include:

• • • What is going to make people perform at their very best?
    • What is going to make everybody create that psychological safety they need?
    • What is going to protect well-being and foster a sense of belonging?

Working through the lens of belonging by default is intersectional because it is human-focused, she explains. “We live in a very intersectional world, and it disincentivizes people with other identities to participate, despite many efforts in the current DEI paradigm to invite ‘allies.’”

Using the belonging and inclusion lens, small networking groups within the overall firm or company are created as a safe place for people to have discussions that focus on people empowering themselves and empowering others. Curiosity is used to explore individuals’ unique qualities and experiences as a way of being within the organization and community that has a responsibility to protect the well-being of everyone, regardless of who they are or into what demographic they fit.

How to execute a belonging strategy

Using belonging and well-being as a fundamental context, May says organizations should start with a future vision of culture that defines a framework to attract the right sort of talent at the board level. Then, once the board is in place, it should then in turn focus on identifying individuals who display these culture framework attributes as part of the board’s succession plan. The board also needs to partner with future board members to outline how to empower employees based on activities and behaviors. Along the way, existing systems of promotion and performance evaluation are left alone.

To demonstrate the positive results from this approach, May describes how one client emerged through this process as an employee-owned business with a four-day work week and unlimited paid time off because it asked employees what they wanted. Those next-in-line for the board have evolved into a hub of the community rather than being seen at the top, directing down.

She says that a key part of the solution is to have first-line and middle managers appoint someone to ask the following questions “until it becomes a habit to ensure inclusion is weaved into every process, including performance evaluation, promotion, recruitment, training, and onboarding system.” These questions include:

• • • Who have we forgot to consider while we’re making this decision?
    • Who might we have disadvantaged with the action we’ve just decided upon?
    • Is there anybody else that we should ask about this decision who may be able to give us an alternative perspective?

The result allows law firms, tax & accounting firms, and corporations to build their culture through behavior and habit because people will start skewing their decisions in the in the right way by default without it having to be a formal process.

Indeed, a few men believe that DEI efforts at their firms and companies disadvantage them and voice some real concerns about it. To learn how best to respond to these concerns, the Thomson Reuters Institute consulted with its Equity, Diversity & Inclusion advisory board to gain the experience of members and learn their thoughts on effective responses.

3 ways to address concerns about specific initiatives being unfair

Employee resource groups (ERGs) and targeted leadership programs have been part of the DEI fabric for a while. In fact, ERGs started off being a group for support, networking, and mentoring; however, as the need for increased representation of diverse individuals at senior levels within organizations has expanded, there is a growing perception that ERGs are providing an advantage to under-represented talent.

Here are some of the best ways to respond to concerns around ERGs and other internal efforts that white men may see as more advantageous to minority talent:

1. Collect more information and listen for common ground — Seek to understand what men are perceiving as unfair by saying, “Tell me more about what you see as unfair…”

Then, perhaps explain to those concerned that some communities — such as first-gen college and law students — don’t have access to family and friend networks of white-collar professionals. Therefore, they have a need for mentors and sponsors who can help them navigate the unwritten rules and norms for success. And that’s why forward-thinking employers have put together targeted programs as part of their offer.

2. Point out that diverse talent is good for business — Explain to them that clients want diverse perspectives in their supply chain. There are hundreds of in-house counsel and corporate accounting and tax functions that are looking for diversity on the teams that staff their engagements because they see the value of having different perspectives — such as gaining new insights or avoiding blind spots. Failure to adhere to these requirements means that law and accounting firms run the risk of losing work, which hurts everyone.

In addition, all employees benefit from having diverse teammates, supervisors, and stakeholders because leaders are consistently working on and stress-testing key cross-cultural skills like cultural fluency, delivering and receiving feedback, effectively addressing conflict, and learning how to grow and support the development of diverse teams.

3. Make it personal about legacy — Ask those who have concerns, “Wouldn’t you want your daughter (or wife, mother, niece, or LGBTQ cousin) to be in an environment where their perspective is valued, and they can thrive?”

Then, emphasize that white men may also identify as members of under-represented or marginalized groups at times. All communities are multidimensional, including people with disabilities, veterans, first-gen college students, and LGBTQ+ individuals, among others. In this way, white men may be members of an under-represented group as well.

How to respond to concerns about lack of future job opportunities because of DEI

One of the default, yet problematic, criticisms around DEI is that it is a zero-sum game. While this is an alluring belief where someone wins and someone loses, it is exactly the opposite. If the organization is stronger and performs better, more opportunity is created for all. Here are a couple of ways to deal with this “zero sum” game mentality:

Use an analogy, such as the “curb-cut effect”  — Shane Lloyd, Head of Diversity, Inclusion & Belonging at Baker Tilly US, points out that one way to think about DEI efforts is with the example of installing curb-cuts on sidewalks to make it easier for people in wheelchairs to cross the street. Yet, it had unintended benefits for others, including people pushing strollers, cyclists, and people with temporary injuries.

Workplace DEI efforts similarly contribute to the curb-cut phenomenon by establishing policies that benefit a broader group. For example, while flexible work arrangements are typically considered women’s issue, men benefit from flexible work arrangements too, allowing them to balance the demands of caregiving or pursuing other interests outside of work.

Highlight what can be gained in terms of leadership — Explain how the most effective leaders are those who can lead diverse teams. Opportunities are expanded when this competency is demonstrated and consistently stress-tested. To lead and actively demonstrate respect from others who are different, it is imperative for leaders to hone these skills by working in normal and challenging conditions.

Today’s business environment requires leaders not only to run an effective operation but also speak to a broader set of issues. An organization with a strong DEI focus will provide opportunities to frame polarizing or highly political issues in a manner that allows for focus on how these dynamics impact people. Framing issues in this way allows leaders to develop an invaluable long-term skill.

In addition, as many companies invest in DEI, it becomes important that leaders have experience playing an active role in DEI efforts. Serving in a leadership role of an affinity group, working towards increasing representation for under-represented talent, or fostering an inclusive culture are competencies and skills that strengthen candidacy for promotion or stretch assignments.

In order for every individual within an organization to have a sense of belonging, to feel comfortable bringing their authentic selves to work, and to engage in friendly debate about work and other issues, everyone needs to be able to engage in healthy dialogue around different understandings and perspectives around DEI.

The workplace is one of the most meaningful environments in which people are engaging across differences. It is important to ensure leaders can enable all team members to have the skills to engage cross-culturally in order to help the business thrive and support an inclusive culture throughout the organization.