A Brief Response Regarding Stakeholder Governance

Harvard Law School Forum on Corporate Governance

Marc S. Gerber Kenton J. King Peter A. Atkins

A recent post on the Harvard Law School Forum on Corporate Governance, “The Friedman Essay and the True Purpose of the Business Corporation,” defends a flawed view of stakeholder governance. If a board’s decision-making process goes forward on the basis of a misconceived view regarding to whom the directors owe their fiduciary duties, we believe that the Delaware courts may not accord the directors the protection of the business judgment rule, but instead may apply the more rigorous entire fairness standard of review.