Judge Dismisses Meta Shareholder Lawsuit Over Director Duties

A Delaware judge has dismissed a shareholder lawsuit asserting novel claims about the roles of corporate leaders and arguing that the loyalties of Meta directors and company founder Mark Zuckerberg should not lie exclusively with the social media giant, Randall Chase reported for the Associated Press (AP).

The plaintiff argued that Meta’s directors have breached their duties to the company by putting profits over broader societal and economic interests, including Meta shareholders’ diversified investments in other companies. I Photo: Mark Zuckerberg Facebook

James McRitchie, who runs a website focused on corporate governance and shareholder activism, argued that Meta’s directors have breached their duties to the company by putting profits over broader societal and economic interests, including Meta shareholders’ diversified investments in other companies.

In a 101-page opinion citing court rulings dating back more than 200 years, decades of law review articles and legal treatises, and even a Sherlock Holmes short story, Vice Chancellor J. Travis Laster rejected McRitchie’s claims.

Laster noted directors of a corporation owe duties to the stockholders as investors in that corporation.

“The plaintiff has not made a persuasive case for change,” Laster wrote.

“At most, he has shown that some academics — primarily from the law and economics school — have assumed that a diversified-investor model is the norm. He has also shown that some investor advocacy organizations would prefer that model.”

While Delaware law requires corporate directors to act in the best interests of their stockholders, including maximizing the value of their shares, attorneys for McRitchie argued that Delaware courts should recognize a “portfolio theory” of corporate governance that takes into account external factors.