In a groundbreaking decision, a Delaware judge has dismissed a shareholder lawsuit that challenged the traditional roles of corporate leaders and questioned where their loyalties should lie. The lawsuit, brought by James McRitchie, a corporate governance and shareholder activism advocate, argued that Meta’s directors and founder Mark Zuckerberg should not prioritize profits over broader societal and economic interests.
Vice Chancellor J. Travis Laster, in a detailed 101-page opinion, cited centuries of legal precedent and rejected McRitchie’s claims. He emphasized that under Delaware corporate law, directors owe duties to the stockholders of the corporation, not to society at large.
McRitchie’s attorneys had argued for a “portfolio theory” of corporate governance, which would consider external factors such as the impact of a company’s actions on society and the global economy. They pointed to issues such as mental health problems among young Instagram users, online human trafficking, and election misinformation as negative externalities of Meta’s social media platforms.
Despite the arguments made by McRitchie’s legal team, the judge ultimately sided with Meta, stating that the plaintiff had not made a compelling case for change. The decision reaffirms the traditional understanding of corporate governance, where directors are tasked with maximizing shareholder value within the confines of the law.
This ruling sets a significant precedent in the realm of corporate law and governance, reaffirming the primacy of shareholder interests in decision-making processes within companies like Meta.