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1999 Ann. Surv. Am. L. 85 (1999)
Corporate Constituency Statutes: Hollow Hopes and False Fears

handle is hein.journals/annam1999 and id is 119 raw text is: CORPORATE CONSTITUENCY STATUTES: HOLLOW HOPES AND FALSE FEARS JONATHAN D. SPRINGER* I INTRODUCTION Since 1983, thirty states have enacted legislation permitting corporate directors to consider the interests of employees and other groups in addition to shareholders when making decisions.1 Such statutes are commonly called corporate constituency stat- utes.2 Proponents of constituency statutes have held out hopes for these statutes to protect the otherwise unprotected interests of peo- ple, notably employees, who may be adversely affected by corporate actions. Opponents' fears have mirrored proponents' hopes: namely, that these statutes -will enable constituency groups or unac- countable managers to wrest the reins of control from their rightful owners-corporate shareholders. Now that sixteen years have elapsed since the passage of the first constituency statute, it is appropriate to assess the legal effects of constituency statutes. This article reviews case law decided under constituency statutes and concludes that constituency statutes have realized neither the hopes they initially inspired nor the fears they initially instilled. Activists who seek to make corporations accounta- ble for the effects that corporate decisions have on society at large therefore cannot rely on constituency statutes to achieve that purpose. Part II presents the context of constituency statutes by discuss- ing the debate over corporate purpose, alternative means to ad- dress constituency interests, and the passage of anti-takeover laws that set the stage for constituency statutes. In Part III, the constitu- ency statutes themselves are described in their variations among * Special Funds Manager, Enterprise Social Investment Corporation, Columbia, Maryland. A.B., Harvard College, 1990. J.D., New York University School of Law, 1999. M.B.A., New York University Stem School of Business, 1999. Special thanks to Peter Cicchino. Thanks also to Ken Anderson and Damon Silvers. 1. See Appendix for a list of constituency statutes. 2. Other terms include nonstockholder constituency statutes and 'stake- holder statutes. Following Eric Orts, this article uses the short, presumably neu- tral, label corporate constituency statutes. See Eric W. Orts, Beyond Shareholders: Interpreting Corporate Constituency Statutes, 61 GEO. WASH. L REtv. 14, 18 (1992). 85 Imaged with the Permission of N.Y.U. Annual Survey of American Law