In recent years, corporate leaders have increasingly described measures they will take to address the concerns of their stakeholders: members of the corporations’ community that do not actually own stock in the company and are therefore not a part of the shareholder class. Perhaps the most prominent example of this trend is the Business Roundtable’s August 2019 Statement on the Purpose of a Corporation, which pledged that the influential corporations comprising the Roundtable will begin focusing on providing value to stakeholders in addition to the routine operation and governance of their companies.
As commendable as this generosity towards stakeholders may sound, it is hard to ignore the tension it appears to create with Delaware’s longstanding shareholder wealth maximization rule. The shareholder wealth maximiation rule provides that a corporation’s directors must make all of their governance decisions with the objective of increasing the wealth of the corporation’s shareholders. If a corporation’s directors make decisions aimed towards creating stakeholder value, are they not violating this shareholder wealth mazimation rule? This Comment analyzes the state of corporate purpose law in Delaware to ascertain where the stated initiatives of the Business Roundtable fit in relation to the shareholder wealth maximization rule and the business judgment rule.
This Comment argues that, as corporate purpose law is currently treated in Delaware, the Business Roundtable corporations have an opportunity to implement stakeholder iniatives under the protection of the business judgment rule, which requires that courts not interfere with a corporation’s good-faith business decisions. This Comment also recognizes, however, that stakeholder focus to the degree suggested by the Business Roundtable Statement is completely unprecedented, which could prompt newfound enforcement of the shareholder wealth maximization rule. Which of these two outcomes will prevail remains to be seen.
