When corporations make commitments to stakeholders, they often do so voluntarily and without contracts. But perhaps unsurprisingly, they also regularly flip-flop on those voluntary commitments.
Take retailer Target. A few years ago, it rolled out a variety of initiatives aimed at diversifying its workforce and supporting Black entrepreneurs. Nobody forced Target to do so; it appeared to have done so in response to the zeitgeist. But in January of 2026, shortly after the new Presidential administration came into power, Target abruptly announced that it would roll those initiatives right back due to “the evolving external landscape.”
In Corporate Goodwill, Caley Petrucci considers corporations’ non-binding promises to stakeholders, which are “unmoored from durable, actionable commitment[s].” The article notes that because of this unmooring, corporations regularly and easily abandon their stakeholder promises during periods of transition, such as during a merger or acquisition (M&A), or when there is a change in the political winds. It then proposes a variety of mechanisms, including contractual ones, that might do a better job of holding corporations to their commitments.
This article contributes to one of the most important corporate law debates: What is the corporation’s role in society? Is it to maximize shareholder value, or is it to contribute to society? And if it’s the latter, what’s the mechanism by which contributions to society are determined, measured, and operationalized?
While many have written about these questions, Petrucci brings a nuanced understanding of M&A contracts to the discussion.
A novel review of M&A contracts reveals just how often environmental, social, and governance (“ESG”) issues are brought up in M&A contracts. Relying on data collected from FactSet on recently completed large M&As, the article reports that 37% of buyers and 100% of sellers made representations and warranties about labor and employment matters, including representations about discrimination and harassment. For example, about 13% of buyers and 46% of sellers made so-called “Weinstein clause” representations, in which they asserted that there have not been any recent material allegations of sexual harassment made against corporate leaders.
Representations and warranties are contractual provisions through which buyers and sellers make assertions about their status at the time a contract is signed. The most important of those reps and warranties are “brought down” at closing—that is, buyers and sellers must once again assert that those “fundamental” reps and warranties are true again before the money and assets change hands. But reps and warranties have no staying power after closing: Once the money and assets change hands, the buyer can do whatever it wants with the company it purchased.
The article finds that while ESG-related reps and warranties are common, those same ESG commitments disappear in post-closing covenants—the parts of the M&A contract that bind corporate behavior after the deal is completed.
In other words, while deal parties seem to care about buying (or being bought by) companies committed to ESG issues, these same deal parties are fine with ESG commitments disappearing after the deal is closed. And while one might argue that post-closing covenants are relatively rare in the kinds of public M&A deals that Petrucci analyzes, she notes that they are not unheard of: employees, for example, are “universally” protected by post-closing covenants (although those covenants have many exceptions).
This differentiation between ESG commitments found in reps and warranties vs. in covenants is itself a significant contribution: one that showcases Petrucci’s nuanced understanding of M&A agreements and how parties use them to cover numerous substantive issues at different times of corporate transition. But the paper goes beyond that.
It argues that changes to ESG policy at times of M&A do not necessarily signal abandonment of prosocial commitments (although Petrucci notes that there is an overall decrease in stakeholder commitment consideration). Rather, those changes reflect rearrangements in stakeholder priority. During M&A, for instance, financing parties (lenders) are the stakeholder group elevated above others. During other times, companies might elevate employees or other groups.
The article ends with several suggestions for making stakeholder commitments more durable. Among those is the idea that stakeholders might become third-party beneficiaries via contract. For example, it notes that employees might be able to enforce parts of the M&A agreement that relate to employee rights. These, and other regulatory and contracting solutions, offer some ideas for others to explore.
I greatly enjoyed this article. In recent decades, much has been said about how to incentivize corporations to elevate prosocial goals. But “prosocial” is in the eye of the beholder, and corporate changes within the last fifteen months have shown just how slippery it can be to rely on vague definitions of “prosocial.” Petrucci’s article is fresh—it considers stakeholder governance in the context of M&A contracting. And it is in this fresh recounting of corporate commitments in times of change that we have new insights about corporate commitments and how to make them mean something.
