1. 1 October 15, 2013 Eric Rasmusen, erasmuse@indiana.edu Can a Corporate Director Try to Help Stakeholders? This paper is not yet written. It would be aimed at law reviews. It might also become an amicus brief. (1) In thinking about what “person” means, we must realize that the purpose of such legal person as trusts, estates, and corporations is to advance the purposes of individuals, and so cannot be restricted to profit maximization. They are just ways of organizing individual effort. (2) The individual purposes advanced by the actions of a corporation whose owners are motivated solely by profit can include religious purposes, because the well-being of even the most selfish shareholder depends on the beliefs of his company’s customers, workers, executives, and directors. The law should not require a corporation to listen to its stakeholders, but it should permit them to listen, and to act in their interests if it so desires. In short, civil rights law should follow the business judgement rule. Obamacare cases: Hobby Lobby and its owners wish to offer employee health insurance that for religious reasons excludes coverage of certain birth control pills that they think cause abortions. They seek a preliminary injunction to stop the government from imposing fines for noncompliance until the case is decided on the merits. The circuits have split. Both sides have asked for cert on the question of whether a corporation is a “person” under the federal religious freedom statute. Answering that question is important, but just moves the litigation along a step. How do different forms of organization differ from each other? Normal Corporation Nonprofit corporation Trust, Partnership Sole Proprietorship Hypothetical: The Government legalizes production of special-purpose chemicals that kill one-year-old babies and free companies from all liability. Are the directors legally obliged to sell baby poison? In each case, suppose all the shareholders want to maximize profits and think selling the baby poison will do so. Please the Customers Please the workers Please the director Please suppliers Fiduciary-Not-Agent Corporate Decency Shareholder Virtue Keep the CEO Happy Godly Profits (a) A director or officer has a duty to the corporation to perform the director's or officer's functions in good faith, in a manner that he or she reasonably believes to be in the best interests of the corporation, and with the care that an ordinarily prudent person would reasonably be expected to exercise in a like position and under similar circumstances. This Subsection (a) is subject to the provisions of Subsection (c) (the business judgment rule) where applicable…. (c) A director or officer who makes a business judgment in good faith fulfills the duty under this Section if the director or officer: (1) is not interested in the subject of the business judgment; (2) is informed with respect to the subject of the business judgment to the extent the director or officer reasonably believes to be appropriate under the circumstances; and (3) rationally believes that the business judgment is in the best interests of the corporation.