Forward Global Summit 2025 | Suz Mac Cormac, Morrison & Foerster LLP

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Suz Mac Cormac

Partner

Morrison & Foerster LLP

Beyond profits: The corporate governance shift driving impact investing

Impact investing is entering a new phase as innovative corporate structures redefine how businesses align financial success with social and environmental responsibility.Models such as public benefit corporations, perpetual purpose trusts and sidecar public charities are transforming traditional governance by embedding purpose directly into corporate strategy. These emerging frameworks offer a compelling solution to the widening gap between limited philanthropic resources and the mounting urgency of global challenges, proving that profit and purpose no longer have to be at odds, according to Suz Mac Cormac (pictured), partner at Morrison & Foerster LLP

play_circle_outline Leveraging innovation in corporate governance for positive impact in capital markets

play_circle_outline Need for mindset shift towards long-term impact and environmental and social responsibility

play_circle_outline ESG factors tied to shareholder value and profitability, broad scope including climate risk assessments.

play_circle_outline Anti-ESG focus on climate and DEI, importance of diversity in yielding better results.

play_circle_outline Dual fiduciary duties in PBCs, integrating impact with profit for making a difference.

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Suz Mac Cormac, Morrison & Foerster LLP

Suz Mac Cormac

Partner Morrison & Foerster LLP

Suz Mac Cormac of Morrison & Foerster LLP discusses innovative approaches in corporate governance at the Forward Global Summit 2025. As a recognized expert in the field, she shares insights on how structures within capital markets can address pressing global issues, such as climate change, inequality and education.

In a recent conversation with theCUBE's John Furrier, Mac Cormac outlines a strategic vision for driving significant change in the modern corporate landscape. The discussion analyzes the intersection of capital markets, governance and soci... Read more

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What is the key thesis for the vision of how structure can drive change in capital markets, law, and finance? add

What are some of the biggest hurdles when it comes to setting up a perpetual purpose trust, such as the one used in Patagonia for employee engagement purposes? add

What was the origin and reasoning behind the term ESG, as coined in 2004? add

What are the two elements that the speaker believes the anti-ESG movement comes down to? add

What is Anthropic and Elon Musk's AI company in Nevada both examples of? add

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>> Welcome back everyone to theCUBE. I'm John Furrier, your host. We are here in L.A. for Forward Global Summit 2025, where the greatest minds are coming together in the industry across all disciplines, entrepreneurs, philanthropists, attorneys. We have one here and many more people looking at making the world a better place as a trusted network is developing. Forward Global is doing so much innovative things. Sue McCormick is here. She's leading the charge on innovation in corporate governance meets impact, money, everything kind of confluent. Where innovation is being fueled by these new ideas. Sue, it's great to have you on theCUBE. Thanks for coming on.

>> Thanks so much for having me.

>> So you were just on the panel here at Forward Global, impressive conversation, but what jumps out at me is you've got your eye on something that's a lever that can be pulled and pushed to make major change in capital markets, law and finance. As companies like ours, as we're entrepreneurs, we're not always thinking about other things. You're working on an amazing project. Explain the key thesis for your vision of how structure can be-

>> Can drive change?

>> Can drive change.

>> Well, this started for me back in 2001 because for personal reasons, I saw climate and I started doing work for the Nature Conservancy, and I realized early on, actually from the head of TNC back then, that philanthropic capital at that point was half and now it is a quarter of the capital markets. It's just a tiny fraction. Meanwhile, government has gotten less involved, but the needs for philanthropy, the needs to actually affect positive change in healthcare, in education, in diversity, combating racism, inequality, climate across the map have also risen exponentially for all kinds of reasons. And so if you look at that small amount of money and the magnitude of the problem that's growing, I started doing actually a lot of research and I teach it at Berkeley Law School and philanthropy has tripled since 1980, everything that philanthropy is trying to address has gotten markedly worse. Everything. From the notions to healthcare to education to inequality. My thesis is what are the things we could do in the mainstream capital markets that could actually help alleviate or help address some of those issues. And so for me, corporate form and governance, it's kind of like the scaffolding. If you look at a building, it goes in the direction of the scaffolding. So the scaffolding around the non-profits, the scaffolding around funds, the scaffolding around small business, entrepreneurs, the scaffolding around large business, public companies and sort of playing with that scaffolding. And some of the solutions that we've been working on now for 25 years. Some of them are like you throw the rule book out. We don't need outside capital. We can self-fund. We can do whatever we want to. That yields one type of option. And then there are companies that need mainstream capital to grow in scale. They need to be public and in the public markets and that's a separate set of tools and you need all of them.

>> Yeah, horses for courses as they say. So this idea of transformation is a theme I see intersecting from our perspective, AI and all these conversations about business transformation. Yeah, we're going through digital transformation so the big tailwind of change. What you just said, what I heard was the problems aren't better. The number of problems are going up and the capital is just like this sliver. And so okay, that's a problem. And the solution is to what intersect capital markets create a new scaffolding. What's the solution that you see developing? Is it to create kind of a kind of compatibility of scaffolding or structure? Take us through how you see an answer because obviously we need more money to do that.

>> To solve the problem. And I think it's helpful if you break it down and actually to go back, and AI is the hottest term. If you look at the AI companies, almost all of them are using new corporate forms and new scaffolding, almost all of them. So these two worlds are intersecting, but in fact you do have different sets of solutions depending on where you are. And how much capital you need and also how mature you are as an organization because what you can do operationally is maybe limited by the people that you have if you're small and by what you're focusing on. If you're a small startup entrepreneur and you've got a fabulous idea, and you've got three people and you're working in your garage, a complicated perpetual purpose trust may not be right for you. Using a public benefit corporation where you have dual fiduciary duties and as a founder you can have more control because you can set a mission or a public benefit that is equal to driving shareholder value. And you've got to balance both of those, board and management. And you have a class of stock that you hold on to like the dual class so that you can make sure that that doesn't change. That's huge. You have more control over your destiny. That forum, there are 22 publicly traded PBCs. And so it is gone mainstream, and in fact it can act as a sweet pill. If you don't want your company to be sold, let's just say you're working in climate tech or you're working in AII and you don't want a certain person or entities to be able to buy you and pay the highest price, if you do not believe they will stay true to your public benefit of your mission, you can actually say, "No." So that's one-

>> Isn't that a poison pill?

>> We are calling it a sweet pill. It's exactly like a poison pill. So it gives you a legal tool to have more control over-

>> On values, on mission?

>> On keeping the mission as the company grows and scales. So that's one option if you're a small startup. Another option is what we've talked about before, which is the sidecar public charity. I'll give you an example, flexport.org. So you have your company and most companies think about if they have a charitable organization, they think about funding a foundation, right? They put money into a nonprofit organization, they make donations over, they get a deduction and then they give it away. That's pure red on the balance sheet of the host, right? This is why everybody has, we're giving 1% or 2% or maybe 5%, but it's always limited to the profits of the entity. If instead of a foundation you put in place a public charity and you could do it a fiscally sponsored public charity. So somebody else has all the administrative burden, you have a public charity. That public charity, as long as you have disinterested governance, can engage in commerce with the host. What does that mean? It means it can buy the services, the IP from the main company that's accretive-

>> It's just revenue-...

>> to the evaluation....

>> to the company.

>> It's revenue to the company, and then it can use those for things that are very high impact or-

>> Oh, directed?...

>> or low margin, yeah.

>> So you direct that charity to deploy-

>> To do something that is complimentary. It never works If they compete, it always works if they're doing something. And I'll give you two examples. Well, Flexport is one where certain types of companies like the American Red Cross does business with .org. .org buys the logistic services and has the contract in Gaza, in the very hard to reach difficult places. Another example is Medicines360 or Revolution Foods. You can have two different markets. You can say, "Okay, the for-profit is going to attack the market that can play the higher price, and the non-profit is going to sell the same products to, for example, women in very poor countries and either give them away or sell them." Or you can do things that are complimentary. So you have the for-profit that is for example, selling school lunches into schools and the non-profit is retrofitting kitchens in public schools so that they can take the lunches. They're different business models that work, but that really works well.

>> So if I was to use theCUBE as an example, because our topic is climate change. So I want to say, "Hey, I want to create a public charity because there's no real commercial market for me to cover data center, nuclear power." So let's just say this is-

>> And all these solutions. Did you try to address climate?

>> I'd deploy reporters, and I would never do that right now because there's no advertiser, there's no way to monetize it. But if I said, "Hey, I want to do a charity, we're going to dedicate some media." Would that be an example? No, it's a weird example I guess, but is it has to be mission aligned with the profit. So would that?

>> Yes, you could. I mean, again, the devil's in the details. The public charity on the side has to have independent governance, then you have to put together arms select agreements between the two. But then you could hire people in and provide services and pay for those services to do that work with philanthropic dollars. So-

>> And the public-...

>> you could take-...

>> good would be information to the market.

>> Exactly. You have to make sure, especially in this day and age, the one thing about having the sidecar public charity is you really have to make sure that it has an exempt purpose. And under the IRS code, there's seven exempt purposes. Climate is not an exempt purpose. Tackling environmental problems is not an exempt purpose. Education is an exempt purpose.

>> Education, yeah, knowledge.

>> Science is an exempt purpose, and so you want to make sure that you set it up in a way so you are true to.

>> So there are guardrails around target?

>> Exactly.

>> All right, so let's talk about the innovation. If you could take this forward, imagine this continuing the momentum. What do you hope to see happen in an ideal scenario? What are the dots connect? What's that bridge look like as it being built for the future? Is it more participation? Are you optimizing for getting more people on board with this idea? Is it corporations? Is it more of a mindset? What are some of the hurdles you see connecting through or I guess what the question is, what do you hope to see happen?

>> Well, I think two different questions, right? They're the hurdles. The biggest hurdle to me right now is, and I was going to give you just one more alternative, which is the perpetual purpose trust, which is what we put in place in Patagonia and we're using for other purposes, including employee engagement. And one of the biggest hurdles is just inertia. You have a whole legion of bankers and lawyers and business people who think we have to set up as a corporation, that's the right thing to do-

>> We know how to do it.

>> We have to use the natural Venture capital association forms because that's how you get financing. And if you're a nonprofit, you have to take grants, and you have to use the same playbook and the same scaffolding. And what I've been fascinated with over the years as we've developed these, these work at scale. The solutions I've given you, they are not Birkenstock wearing, let's all sing-

>> It's legit....

>> kumbaya. And yet you still have people who believe that you got to follow, you've got to use the existing scaffolding or it's actually wrong. They can't see, and they can't see how the existing scaffolding is actually contributing to the issue because there's not enough funds off of capital. And the mainstream capital markets are maximizing value for shareholders in a way that is going to hurt shareholders in the longterm. Because you can, I mean, just look at the housing market in Florida right now. Anytime if you drive for profitability at all costs and ignore all the externalities, eventually, whether that's your employees who all quit, whether it's the fact that you-

>> So they have to get on board and just the parachute will open.

>> And one of the reasons I'm excited to talk to you, and it's so great that you're here at Forward Global because these are things that can really work, that can work at scale. And we need everybody on board. It's not just one. So it's the investors, it's venture, it's private equity, it's growth equity, it's the large corporates, it's the entrepreneurs. I actually think if you go to the second question, what could really move the needle? To me, if you start with the entrepreneurs, they don't have all of this institutionalization around how they're doing things that is embedded through-

>> Just get them-, get them while they're young.

>> Yeah, or all age. I'm sorry, your average entrepreneur age is like-

>> No age-...

>> 53....

>> doesn't venture for me.

>> Yes, exactly. So it's not just the young bucks coming out of Stanford Business School or-

>> Guys like me.

>> Yeah. It is guys like you. So you start there, and I want to work on both ends of the spectrum with the entrepreneurs but also with not the asset managers, but the asset owners. So if you take the asset owner class, you take your large pension funds, you take your family offices, you take your large endowments, a lot of them are here. And if you are really looking long-term for them, they need to care about this stuff because I'll tell you, for me, I know the most about climate, but the correlation between climate, loss of variable land, civil unrest, and then impact on business as we understand it, it's huge. And so they've got to start imposing on the asset managers. So they invest in the cost.

>> So what's your message for the donors and the people that are going to look at funding this? What's the message to them?

>> My message to the donors and to the LPs. So to me, philanthropy is part of it, but even bigger part of it-

>> Is the-

>> Is the institutional capital.

>> Like VCs-

>> The real-...

>> and private equity.

>> Above them.

>> Oh, the LPs like the institutional, man that's-

>> The institutional money. So the institutional money needs to say to the asset managers, "You have to start factoring this into your investment thesis because otherwise we're all going to lose out."

>> And what's their action item that they have to take, deploy capital, invest in the structure?

>> I mean they can say, "I've tried this out." I mean we are playing with also, we haven't even gotten to different forms of aggregating capital for asset managers and now permanent capital, which was just... And I was talking to one of the gentlemen in Brookfield, he didn't know that I'd been secretly stalking him and studying that form, and I don't work for Brookfield. But what are alternative to funds like permanent capital that can work? How can you encourage slash require your fund managers to be considering this? I think one big change that we can easily, easily make, the LPs can easily make, is with carried interest. Carried interest is the number one cause of inequality in this country. The number one.

>> Really?

>> And if you start saying to the fund managers, "You can't pay yourself all of those profits after you make all these successful investments unless you have hit certain social and environmental benchmarks." That's a game changer.

>> The wallet's connected to the brain, right? As they in Berkeley.

>> That's a game changer. So you're not throwing out the rule book. You're saying, okay, "We'll continue with-

>> New rules....

>> carried interest. Either we've got a tax carried interest, which doesn't seem to be happening anytime soon. Or we've got to say, "I don't think anybody should be earning a couple hundred million a year," but if we have that paradigm, do you get paid that? Because again, you get paid that and then you are considered a good citizen if you give a bunch of it away. Again, this is this you make-

>> Yeah, the paradigm, yeah....

>> your money, you give it away. And no one's looking at the fact that again, all of that money and all that philanthropy is actually making everything worse. Because people are doing good, but it's not affecting the outcome. So if you take how they are making money, and if they're carried interest and dependent on certain specific and they can't do everything.

>> It's like they're missing the bus. They go to the bus stop and the bus came and gone.

>> Yes.

>> They're too slow.

>> They're too slow. But let's just say, "Climate." If you said to them you get climate order of your theses, you're investing in renewable energy, but you can't get paid your carry unless you can actually prove that emissions have reduced a certain amount. Think about the pressure on the public markets, the private, anywhere they're investing. Can I tackle this whole ESG thing?

>> Yeah, go ahead.

>> Yes, because I'm on a roll. So ESG as a term was coined in 2004. It was from a United Nations report from a bunch of institutional investors. The LPs who are investing, and they said, "All of these environmental and social governance factors, there are a whole list of them that are material to shareholder value are not on the balance sheet. And you need to focus on them because they actually matter for financial reasons." This is why ESG has always included privacy, has always included cybersecurity, has always included anti-money laundering, anti-bribery, like long-term. If you run around as a company bribing people, it's going to hurt your bottom line. It included diversity, and it included climate and climate risk. So it is incredibly broad, but it had that initial, it was tied to the profitability of the companies. Then it came out and then it got mixed and merged with what's called corporate social responsibility with his general thesis that you've got a good, and you've got to have a foundation, and we've got to go out on Saturday and plant a tree. And all of a sudden climate risk is an assessment. Let's just say you're a chip manufacturer and you have a manufacturing site in Micronesia and it's a 20-year supply contract, right? You should know whether that manufacturing site is going to be underwater in that 20 year period. There's a good likelihood you're just assessing risk. That's pure business. That was put in the same department as let's go out and plant trees on Saturday because that'll be a good word. And they cut completely diffused.

>> The ball gets hidden.

>> This whole anti-ESG thing is derivative of that other than two things. I was focused on the space and our group was initially called sustainability. The factors are still real and they're still there. It doesn't matter what you call it. And then for me, the anti-ESG comes down to two elements. One is climate. And if you take climate risk, it makes sense. Every company investor should be focusing on it. If you take emission reduction, if I invest heavily, if I'm, let's just say big oil major and I invest heavily in reducing emissions, it's going to affect my stock price, pure and simple. But if nobody does it, we're all screwed. So everybody's stock prices. So how do you create the incentive, but can we just address that as opposed to dressing it up? And the second is DEI, and there is just a difference of opinion. And I am a hundred percent sure that the other side is wrong as to whether increased diversity yields better results. I am confident that increased diversity yields better results. And there are tons of studies that prove that.

>> The data on that.

>> We don't have to and-

>> Talk about baby in the bathwater right there. That's a great example of the bad behavior.

>> Exactly. So the anti-ESG thing is really going to attack on DEI and climate and the two different funding streams. But it was brought about because we tried to take this concept and make it all things to all people and now we have to address it.

>> They politicized-

>> And exactly. And what I like to do is sort of what I do is separate from that. You were looking at different structures. Some of them are concessionary, some of them, if you focus on this, you will get less returns. Okay, let's have some philanthropic capital. Others, you focus here and you don't have any impact on returns or others like our Flexport, like the Sidecar public Charity. If you focus here, you actually might have an increased valuation and higher returns.

>> Yeah. Well, I know you got to catch a car. My final question is, first of all, great stuff. Love to do an hour with you, but the idea of getting-

>> You know I get kind of excited.

>> Getting real-time capital into these impact entrepreneurial ventures was where companies can still make a profit and be at the point of impact. You said it's been around for a while, other companies have doing it, some of the AI companies. What's the best practice? Is there a pattern that you see? Final question, what's the pattern that emerges? More R&D up front or maybe a service that's leading the market that may not be able to be monetized? Or is there any sense to the pattern of when there's a good template?

>> When it's a good tool.

>> When someone's watching says, "Hey, I need that." Why would someone know that this is a great opportunity?

>> The structural solution is the fiscally sponsored non-profit charity because you can set up something, it can meet somebody else, takes care of all the administration, and you just have to put these arm's length agreements. That's kind of the way to do it. Whether it is a good idea for you is looking at your business, and if there are things that you would like to do, I think your example was exactly right. The things that you'd like to do but you can't make money from, but they're directly related to what you do. And if we could use your cube and get more messaging out around this, we could actually affect change in whatever business. It could be R&D, some people are using this, let's prove out the science experiment in terms of putting aerosol in the atmosphere and what will actually work. Then when they prove what will work in terms of putting little particles-

>> The factual data....

>> in it, then that's the signed car and then you license it over and the for-profit's like, "Well, shit, it works." Let's take mainstream capital and scale it

>> OpenAI. It was doing great.

>> Yeah, I'm not allowed to talk about that.

>> Oh, okay. I didn't mean to bring it up, but I know they had a non-profit. Lot of R&D goes into AI.

>> Well, it's public. Anthropic is a PBC with a perpetual purpose trust. Elon Musk's AI company in Nevada is a PBC. That first model where you have the dual fiduciary duties. So if you're an entrepreneur and you're thinking about this, think is there something I could do where I could really make a difference, other than just giving stuff away. And giving money away is not bad, but it's just not really helping the problem, is there something-

>> Synergies and arm's length is the key.

>> Exactly.

>> It's key. Sue, you're a great leader. I love what you're doing. It's totally innovative, and I think this is going to be a great answer for aligning impact with people who are actually making impact and not missing the bus and going, let's put money into the system. Really appreciate-

>> Let's just keep trying to do good and people are doing good, but it's actually not making any difference.

>> Thank you for working with theCUBE and our team. Really appreciate your work.

>> Well, thank you so much.

>> Thank you very much.

>> Okay.

>> The change is upon us, Forward Global, a place where all the smartest people are getting together. It's a trust network. It's a community that's integrating the best of the best to make the world a better place. Of course, theCUBE's bringing all the data. Thanks for watching.