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such indicators created by company poli- cies. He alleges that various negative ex- ternalities caused by the operation of Meta platforms such as Facebook, Instagram, Messenger and WhatsApp — driven by a constant quest for advertising revenues and user traffic — harm GDP and the econo- my as a whole and, hence, the portfolios of diversified stockholders. Although billions of dollars used for Meta stock repurchases could be applied instead to reduce the so- cial and economic costs of Meta’s bottom- line focus, those costs are ignored in favor of higher revenues and general corporate cost-saving.28
A prominent Delaware attorney posted in a recent Harvard Law blog29 that the McRitchie complaint “is based on the tra- ditional shareholder primacy model” and does not seek to expand directors’ fidu- ciary duties to other stakeholders, such as platform users and third-party victims of the alleged externalities. The author notes that the complaint does not allege that the
directors’ “conduct was bad for Meta’s own finances.” However, he concludes that the “complaint posits that in light of these realities — the company’s wide- spread economic impact and the diversifi- cation principle applicable to modern in- vesting — the well-established doctrine of shareholder primacy cannot be rationally applied on behalf of investors without con- sidering the impact of company decisions on diversified portfolios.”
Squaring the Shareholder Primacy Rule with ESG Objectives
Delaware corporate boards face a di- lemma when considering how to respond to investor demands for ESG initiatives. On the one hand, the established share- holder primacy doctrine demands that boards manage the business in order to maximize stockholder wealth or, as recent decisions put it, stockholder “welfare.”30 On the other hand, although given con- siderable discretion in determining how
to achieve such wealth maximization, di- rectors face some litigation risk if they pay too much attention to the interests of non- stockholder stakeholders in the process.
One available solution to this dilemma is the public benefit corporation (PBC), a for-profit corporate form. Delaware’s PBC statute was adopted in 2013.31 In managing a PBC, the board of directors is required to balance “the stockholders’ pe- cuniary interests, the best interests of those materially affected by the corporation’s conduct, and the public benefit or public benefits identified in its certificate of incor- poration.”32 The term “public benefit,” in turn, is broadly defined to include both positive effects and the reduction of nega- tive effects (“artistic, charitable, cultural, economic, educational, environmental, lit- erary, medical, religious, scientific or tech- nological”) on one or more categories of non-stockholder stakeholders (“persons, entities, communities or interests”33). In other words, the statute permits PBCs to
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