Abstract
Environmental, social and governance (ESG) factors have taken the corporate world by storm. Most major stock exchanges now actively promote and expect issuers to have implemented an ESG framework, whilst large financial institutions (sovereign wealth funds, superannuation funds and asset-specific fund managers) have begun prioritising those companies that have met their defined ESG standards.
In light of these global changes, the New Zealand Parliament enacted the Companies (Directors’ Duties) Amendment Act 2023 (the Act), which originated as a member’s bill and represents the introduction of ESG and stakeholder theory into the Companies Act 1993 (the CA). Although a noble gesture, it is nothing more. In seeking to extinguish a shareholder primacy ‘legal norm’ existing in New Zealand corporate governance, Parliament has not only introduced symbolic, ineffective machinery but created a plethora of avoidable implications. This dissertation argues that the Act does not provide utility, but instead has a detrimental effect. It highlights a need for reform. The CA must emphasise the formulation of a company as a separate legal entity, not a collection of shareholders, and clarify that a company’s best interests are those of the entity. Such reform achieves the desired ends of the Act, aided by the influence of market trends, consumers and non-legislative instruments; these forces command stakeholder and ESG-related decision-making to maximise and sustain entity value.