I'm Catholic. I take creeds seriously. So I was amused and interested by Josh Fershee's statement of belief, which I offer with my annotations:
I believe in the theory of Director Primacy.[1] I believe in the Business Judgment Rule as an abstention doctrine,[2] and I believe that Corporate Social Responsibility is choice, not a mandate.[3] I believe in long-term planning over short-term profits, but I believe that directors get to choose either one to be the focus of their companies.[4] I believe that directors can choose to pursue profit through corporate philanthropy and good works in the community or through mergers and acquisitions with a plan to slash worker benefits and sell-off a business in pieces.[5] I believe that a corporation can make religious-based decisions—such as closing on Sundays—and that a corporation can make worker-based decisions—such as providing top-quality health care and parental leave—but I believe both such bases for decisions must be rooted in the directors’ judgment such decisions will maximize the value of the business for shareholders for the decision to get the benefit of business judgment rule protection.[6] I believe that directors, and to [sic; did he mean not?} shareholder or judges, should make decisions about how a company should pursue profit and stability.[7] I believe that public companies should be able to plan like private companies,[8] and I believe the decision to expand or change a business model is the decision of the directors and only the directors.[9] I believe that respect for directors’ business judgment allows for coexistence of companies of multiple views—from CVS Caremark and craigslist to Wal-Mart and Hobby Lobby—without necessarily violating any shareholder wealth maximization norms.[10] Finally, I believe that the exercise of business judgment should not be run through a liberal or conservative filter because liberal and conservative business leaders have both been responsible for massive long-term wealth creation.[11] This, I believe.
[1] I concur, of course. See my book The New Corporate Governance in Theory and Practice, especially Chapter 1 thereof. See also Director primacy, http://en.wikipedia.org/w/index.php?title=Director_primacy&oldid=621020942 (last visited Mar. 30, 2015).
[2] Again, I concur. See my article The Business Judgment Rule as Abstention Doctrine (July 29, 2003). UCLA, School of Law, Law and Econ. Research Paper No. 03-18. Available at SSRN: http://ssrn.com/abstract=429260
[3] I agree with Henry Manne that an action qualifies as CSR, inter alia, only if it is voluntary and “one for which the marginal returns to the corporation are less than the returns available from some alternative expenditure.” That definition excludes a lot of stuff that we casually call CSR. But as to corporate acts that meet that definition, I think they violate directors’ duties (albeit that in most cases that will not result in liability due to the BJR).
[4] I agree, subject to the caveat that I think too many hedge funds are pressing too many boards to pursue short-term gains at the expense of sustainable long-run shareholder wealth maximization and, accordingly, that boards need more insulation from shareholder pressure. See my essay Preserving Director Primacy by Managing Shareholder Interventions (August 27, 2013). Research Handbook on Shareholder Power and Activism, Forthcoming; UCLA School of Law, Law-Econ. Research Paper No. 13-09. Available at SSRN: http://ssrn.com/abstract=2298415
[5] Agreed, subject to the provisos embedded in footnote 3.
[6] See my post "Corporate Law after Hobby Lobby"
[7] Agreed. Again, see my book The New Corporate Governance in Theory and Practice, especially Chapters 3 and 5 thereof.
[8] I’m not sure what that means.
[9] Agreed. Again, see my essay Research Handbook on Shareholder Power and Activism, Forthcoming; UCLA School of Law, Law-Econ. Research Paper No. 13-09. Available at SSRN: http://ssrn.com/abstract=2298415
[10] Agreed.
[11] Now that gets complicated. But those complications are for another day.
