I have written recently about the duties of corporate decision-makers. The issue was highlighted by a statement issued last month by the Business Round Table.
This post on the Columbia Law School’s blog gives the best explanation I have seen yet of the implications of the Business Round Table’s statement. Money quote:
Delaware law certainly permits boards to consider stakeholder interests and take a long-term view on how best to maximize corporate wealth. At the same time, it is clear that shareholders are the only constituency with a claim on Delaware boards’ fiduciary duties. Any evolution of corporate behavior in light of the BRT’s Statement will have to occur within the guardrails set by that reality.
And because virtually all major U.S. corporations are organized under Delaware law, their decision makers must follow Delaware law.
Via Professor Bainbridge.
Constitution Day is September 17. That’s the day in 1787 that the United States Constitution was signed by delegates to the Constitutional Convention.
Here’s a question to ponder for Constitution Day: would a federal wealth tax, suggested by some politicians, be constitutional? There are credible opinions on both sides of the question.
And while I’m on the subject of politicians’ tax proposals, it’s still crickets from that senator who said he wants a tax on unrealized capital gains. Remember I predicted that he would probably never provide the details of how his proposal would work? That’s because it won’t work.
Where, or how, does he find this stuff? Lowering the Bar found a story about a judge who, while presiding over a criminal trial, was caught driving the defendant’s Porsche, which the same judge had ordered to be seized before the trial. You can’t make this stuff up.
I should be quick to point out that this did not happen in the United States.
The judge claimed that he took possession of the car not because he wanted to use it, but because the police didn’t have a safe place to keep it. A higher court didn’t buy that explanation and suspended the judge.
JUST BECAUSE A GROUP OF CEOS SAID THAT THE INTERESTS OF OTHER “STAKEHOLDERS” SHOULD BE CONSIDERED IN CORPORATE DECISIONS DOESN’T MEAN THAT'S THE LAW
As Professor Bainbridge points out once again, the law is not what the CEOs say, or think it should be. Shareholder wealth maximization is the law. CEOs who act otherwise are endangering their own employment and the survival of their companies.
I readily concede that corporate social responsibility has its place, but only when it is consistent with the corporation’s duty to maximize the return on its shareholders’ investment.
I HAVE SAID IT BEFORE, AND I WILL SAY IT AGAIN: BUSINESSES DO NOT EXIST TO SERVE ANY “STAKEHOLDERS” OTHER THAN THEIR SHAREHOLDERS
Business corporations exist to create value for their owners by delivering goods and services. Period. I don’t care what some group of CEOs says to the contrary.
If those CEOs direct their corporations to serve the interests of parties other than the shareholders of their corporations, the market will respond negatively, and those CEOs will deserve to lose their jobs.
I have expressed skepticism before about the notion that artificial intelligence will replace lawyers. A recent article in the Arizona Law Review backs up my speculation.
It may happen eventually, but at this point, I think that chances of it happening before I’m retired or deceased are pretty slim.
No kidding, there is a be kind to lawyers day, and it is today, the second Tuesday in April. Actually, it’s International Be Kind to Lawyers Day. I don’t why I hadn’t heard about it before. Read all about it at bekindtolawyers.com.
On the heels of an online petition and suggestions there could be a do-over comes news that Saints fans have resorted to the courts to remedy their loss.
I conclude that Saints fans are having difficulty coping with their grief.
Instapundit makes the point that the officers and directors of a corporation have a fiduciary duty to the corporation’s shareholders, that is, they have a duty to act in the best interests of the shareholders. It’s a point that I have brought up before.
Businesses entities (which is what corporations are) exist to create value for their owners (i.e., the shareholders) by delivering goods and services. It’s that simple. They have no other purpose.
I’m not going to link directly to the item linked in that Instapundit post, because the item is, frankly, tripe. Publicly-owned corporations have no “political responsibility.” They have a legal responsibility to maximize return on investment to their shareholders. Corporate sensitivity to social concerns can be justified legally only if it results in a better return on investment to the shareholders.
The contents of this blog, this web site, and any writings by me that are linked here, are all my personal commentary. None of it is intended to be legal advice for your situation.