In a recent shareholder lawsuit in Delaware, James McRitchie argued that Meta’s directors, including founder Mark Zuckerberg, have breached their duties by prioritizing profits over broader societal and economic interests. The lawsuit claimed that the loyalty of the directors should not lie exclusively with the social media giant, but also with Meta shareholders’ diversified investments in other companies. However, Vice Chancellor J. Travis Laster dismissed these claims, stating that under the standard Delaware formulation of corporate law, directors owe duties to stockholders as investors in that corporation.
While Delaware law requires corporate directors to act in the best interests of their stockholders, including maximizing the value of their shares, McRitchie’s attorneys argued for a “portfolio theory” of corporate governance that takes into account external factors. They pointed out that Meta, which owns several popular social media platforms, has prioritized profits while downplaying the negative impacts of its products on society and the global economy. The lawsuit blamed Meta’s platforms for mental health problems among young Instagram users, online human trafficking, vaccine hesitancy, incitements to violence, and election misinformation, all of which can negatively affect the investment portfolios of Meta shareholders who have investments in other companies.
The judge’s opinion referenced court rulings dating back more than 200 years, as well as legal treatises and even a Sherlock Holmes short story. While acknowledging the concerns raised by McRitchie, the judge ultimately concluded that the plaintiff had not made a persuasive case for change. He noted that some academics and investor advocacy organizations may prefer a diversified-investor model, but emphasized that the standard Delaware formulation of corporate law still applies. Directors of a corporation owe duties to the stockholders as investors in that corporation, with a primary focus on maximizing shareholder value.
The lawsuit’s claims about the detrimental effects of Meta’s social media platforms highlight ongoing concerns about the impact of technology companies on society. Issues such as mental health problems, online trafficking, and misinformation have become increasingly prevalent in discussions about the responsibilities of tech companies and their leadership. The dismissal of this lawsuit underscores the challenges of holding corporate leaders accountable for broader societal impacts, as the legal framework often prioritizes shareholder value above other considerations. Moving forward, the debate over corporate governance and the role of directors in addressing external factors is likely to continue as stakeholders grapple with the complexities of the digital age.
Despite the dismissal of this particular lawsuit, the broader conversation about corporate responsibility and the influence of tech companies on society is far from over. Shareholders, activists, and policymakers continue to grapple with the implications of unchecked growth and power in the tech sector, particularly as concerns about privacy, misinformation, and societal well-being persist. As debates about corporate governance evolve, it remains to be seen how companies like Meta will navigate these challenges and balance the interests of their shareholders with the broader societal impacts of their products and services. The outcome of this lawsuit may serve as a catalyst for further discussions about the responsibilities of corporate leaders in the digital age.
