Meeting Fiduciary Duties When Speaking Up: A 21st Century Roadmap
The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2024”.
Companies today face more pressure to speak on social and political issues than ever before. With the constant barrage of issues, the consequences of any course of action can be hard to predict. Speaking up can risk backlash for saying the wrong thing, but refraining from speaking at all may no longer be a reliable way to stay above the fray and avoid criticism. Companies may conclude that, when it comes to issues of great importance to their stakeholders, silence is no longer an option. One question that follows for boards and management, then, is whether they can break the silence without breaching their fiduciary duties.
Consider this now-commonplace scenario: The U.S. Supreme Court issues a ruling that is popular among some stakeholders but is considered morally problematic—perhaps even a cause for great concern—to other stakeholders. It may well be the case that the ruling bears directly on an issue of political significance with little or no obvious direct relevance for businesses or commercial conduct. Nonetheless, it will surprise no one when a company with major domestic operations is bombarded with feedback from its customers and employees expressing outrage at the ruling and demanding that the company take action in response. After much deliberation, the board and management reach a consensus that the company has no choice but to respond—if not to the Supreme Court, then at least to its own customers and employees. Can they do so in a way that is consistent with their fiduciary duties to act in the best interests of the company and its stockholders?
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