Partner Jamie E. Hanley and Associate Grace Harmon authored the Pensions Expert article, “Should Pension Funds Use Litigation as a Stewardship Tool?,” which examines how shareholder litigation can serve as an important governance mechanism for UK pension schemes to fulfill fiduciary duties by holding corporations accountable, deterring bad actors, and protecting assets.
As UK policymakers sharpen their focus on planning and stewardship issues, there is an increasing focus on how far trustees should go to fulfill fiduciary duties. Jamie and Grace emphasize that, if The Pensions Regulator (TPR) were to develop a Stewardship Code for the emerging issue of transition planning, shareholder litigation should be included in pension schemes’ stewardship toolkits as an effective mechanism that aligns with their fiduciary obligations.
Built on the principle of active ownership, the UK Stewardship Code affirms that investors should monitor companies and escalate matters where concerns persist. While escalation often includes voting against directors, reducing investment exposure, or collaborating with other investors, the authors note that corporations engaging in fraud or misleading investors “are unlikely to change their behavior if escalation never reaches the threats they fear most.” They further contend that a well-designed Transition Planning Code, serious about financial risk management, should incorporate legal remedies where corporate misconduct is alleged, positioning litigation as “the endpoint of a structured escalation pathway.”
In considering litigation, Jamie and Grace emphasize that trustees “do so not as campaigners but as fiduciaries” whose primary duty is to act in the best financial interests of members. Recent cases demonstrate that investors can successfully use legal channels to escalate governance concerns. In Ramirez v. Exxon Mobil Corporation, before the U.S. District Court for the Northern District of Texas, shareholders survived a motion to dismiss on claims that Exxon’s financial position and climate-related risks were misleading, signaling that U.S. courts are prepared to let such claims to proceed to discovery. Similarly, in ClientEarth, Surfrider Foundation Europe, and Zero Waste France v. Danone, before the Judicial Court of Paris, non-governmental organizations secured commitments from Danone to update its vigilance plan and implement solutions—further illustrating how litigation can drive corporate accountability.
These cases, the authors highlight, “illustrate that litigation can serve three governance functions: accountability, deterrence, and value protection.” The credible threat of legal action reinforces the integrity of corporate disclosures, deters misstatements, sharpens board oversight, and may provide recovery where governance failures lead to financial loss. Seen through this lens, Jamie and Grace note, “litigation aligns absolutely with fiduciary duty,” protecting beneficiaries from material financial risks arising from poor governance. They conclude that, in this context, “litigation is not a political act” but rather “a tool within the architecture of corporate accountability.”