Director Duties And ESG Considerations

Bulgarian law requires that the directors of Bulgarian joint-stock companies perform their functions as directors by adhering to the "duty of care" standard of a prudent businessperson and always in the interest of the company and its shareholders. If a director fails to comply, they could be held liable for any damages caused to the company.

The required duty of care standard is not easily reconciled with the current shift in corporate governance towards compliance with material ESG factors. While important for all stakeholders (e.g., employees, customers, vendors, and the communities where the company operates), ESG compliance could trigger additional financial costs and potentially be an obstacle to maximising profits. As it is expected that a prudent director would not trigger unjustified or unnecessary costs, ESG could be reconciled with the duty of care standard for directors only if it can be demonstrated that integrating ESG factors at an additional cost