Intel Adds Sustainability to Corporate Charter

[Editor’s Note: This article originally appeared on SocialFunds.com and is reprinted with permission.]

In what John Harrington, President and CEO of Harrington Investments, called “a major victory for advocates of corporate responsibility and environmental sustainability,” Intel agreed to a shareowner resolution requesting the creation of a Board Committee on Sustainability.

This was the second year in which Harrington submitted the resolution. Last year, Intel opposed the request, stating, “The Board does not believe that an additional, redundant board committee is necessary to manage sustainability issues.” While Intel initially opposed this year’s resolution as well, engagement with Harrington led to an agreement by the company to change its corporate charter by requiring the Governance and Nominating Committee to report to the Board “with regards to matters of corporate responsibility and sustainability performance, including potential long and short term trends and impacts to our business of environmental, social and governance issues, including the company’s public reporting on these topics.”

As a result of the change in Intel’s corporate charter, Harrington agreed to withdraw its bylaw amendment resolution.

{related_content}Furthermore, according to Harrington, Intel directed its outside legal counsel to “write a legal opinion specifically stating that pursuant to Delaware law, corporate responsibility and sustainability reporting based upon the committee’s charter, was part of the fiduciary duty of company directors.”

The idea that consideration of environmental, social, and governance (ESG) criteria represents a fiduciary duty has become entrenched in the social investment community at least since the United Nations Environment Program Finance Initiative (UNEP FI) issued the first Freshfields report in 2005.

The focus of that report and its 2009 follow-up, however, were on the investment side of the equation, concluding that it may well be the legal responsibility of investment advisors to incorporate ESG issues into their investment services.

The implications of a legal opinion from corporate counsel agreeing that consideration of environmental, social, and governance (ESG) criteria, as well as sustainability reporting, represent a fiduciary duty for corporate Boards of Directors, could extend beyond the activities of Intel alone. As the Securities and Exchange Commission (SEC) ponders mandatory corporate reporting of ESG criteria, the legal opinion helps form a basis for the position that such reporting is a critical factor in corporate financial performance.