DOVER, Del. – A Delaware judge on Tuesday 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.
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.
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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 that, under the “standard Delaware formulation” of corporate law, 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.
They argued, for example, that Meta, which owns Facebook, Instagram, Messenger and WhatsApp, has prioritized profits while downplaying the detrimental effects of its products on society and the global economy. That, in turn, they said, can negatively affect the investment portfolios of Meta shareholders who also have invested in other companies.
Among the “negative externalities” the lawsuit blamed on Meta’s social media platforms are mental health problems among young Instagram users, online human trafficking, “vaccine hesitancy,” incitements to violence, and “election misinformation.”