Yesterday’s Wall Street Journal featured a front page article about an apparently increasing number of CEOs of public companies who use their companies’ resources, and wield their companies’ resources as a sword, to advocate in their official corporate capacities to advance their favorite social agendas–or to oppose legislation on social policies that they disfavor. Courtesy of highly-regarded corporate law scholar Professor Stephen Bainbridge, we have citations to, and quotes from, a recent law review article by the Chief Justice of the Delaware Supreme Court, in which he reiterates a bedrock principle of Delaware corporate law that corporate directors and officers of for-profit Delaware companies “… must make stockholder welfare their sole end….” Leo E. Strine, Jr., The Dangers of Denial: The Need for A Clear-Eyed Understanding of the Power and Accountability Structure Established by the Delaware General Corporation Law, 50 Wake Forest Law Review 761, 767 (2015).
If a stockholder thought that a CEO of a public company was more focused on social activism than observing his or her duty to maintain a focus on maximizing shareholder wealth, one element of a claim would be the measure of damages. If a company is profitable “enough”, the CEO may “get a pass”. But the recent downward trajectory of the stock price of profitable companies like Apple, which recently lost about $73 billion in market value, and an unrelated petition of over one million people who are boycotting Target department stores due to their position on recent gender issues, may gain the attention of a different type of activist: plaintiffs’ lawyers who specialize in stockholder class actions.
SUPPLEMENT: Kevin LaCroix on his blog The D&O Diary, has a characteristically thoughtful analysis of this issue. Both he and Professor Bainbridge kindly linked to my blog post. The good professor also linked to additional commentary on this issue.