Should companies that alienate customers and hamstring themselves in the name of wokeness be held to account by investors in court? Sen. Marco Rubio thinks so — and he introduced a bill that would do just that.
The Mind Your Own Business Act, unveiled by the Florida Republican on Thursday, would force corporate directors to testify in court that they were acting in their company’s best interest when taking political actions if sued by shareholders.
“Patriotic Americans who love their country and the opportunity it provides should be able to fight back against the growing tyranny of the woke elites running corporate America,” Rubio said in a statement.
“These are often nationless corporations that amass fortunes divorced from the fate of our great country while pushing socially destructive, far left policies like boycotts and cancel crusades at home,” the sentator said.
“My Mind Your Own Business Act would put the burden of proof on corporations to show that their far left actions were in shareholders’ best interests, and make corporate directors and officers personally liable if they can’t prove it.”
The bill would require a company listed on public stock exchanges to provide large shareholders “certain privileges with respect to claims for breach of fiduciary duty” if that corporation “takes an action on a primarily non-pecuniary basis in response to State law, boycotts a class of persons or industry on a primarily non-pecuniary basis, or uses primarily non-pecuniary public reasoning for an action.”
It’s not difficult to identify examples of all three.
In the first class — actions taken in response to state law — you have the anaphylactic reaction of corporate America to a relatively moderate voter integrity law in Georgia, a reaction that included moving the MLB All-Star Game from Atlanta to Denver.
In the second class, you have banks that won’t deal with gun manufacturers.
In the third class, pretty much any self-sabotaging corporate posturing that surfs on the crest of a wokeness wave would qualify.
As Rubio pointed out in an Op-Ed for Fox Business published Thursday, shareholders theoretically should be able to sue these companies for damages already — but the cards are stacked against them.
“One solution is to empower shareholders to push back,” the senator wrote. “If you own a stock, invest in a mutual fund, have a company-sponsored 401k, then you are a shareholder and are owed legal duties by the corporations you invest in. The truth is that corporate executives keep you in the dark about your right to hold them accountable for how they spend your money
“Under current law, a shareholder has the right to sue corporate officers when they take actions like these that are motivated by their politics rather than your financial interests. But corporations have stacked the deck to make these lawsuits hopeless. They tweak provisions in their bylaws to protect themselves as they leave America behind.”
Thus, Rubio said, his legislation would “provide a clear path forward for shareholders when they sue in response to these actions” by putting the burden of proof on companies.
“No more legal tricks that shield these corporate executives from accountability. If they really believe that being woke is good for business, they should have to say so — and prove it — under oath in court.”
The tactic would be an interesting one. For instance, imagine the corporate officers of Nike going to court to justify their 2019 decision to nix a shoe with the Betsy Ross flag on the side — reportedly at the behest of Colin Kaepernick, a Nike endorser who reached out to the company to complain that the flag had offensive historical connections.
Nike’s fealty to Kaepernick has mostly been forgotten by the former NFL quarterback and his allies, who’ve moved onward and upward. For conservatives, however, the affair still sticks in their craw. Was it a good pecuniary choice for Nike? More importantly, did executives believe it was?
The senator’s proposal was applauded by the Free Enterprise Project, a conservative shareholder activist group.
“We heartily endorse Senator Rubio’s efforts,” said FEP director Scott Shepherd, according to a news release. “This is an important first step toward reining in the most aggressively politicized American corporations.”
“Increasing numbers of corporate executives have indulged their own personal policy preferences at company – shareholder – expense, taking controversial, inflammatory and oft-times discriminatory and illegal positions on behalf of their companies,” Shepherd added.
“All of this has to stop. The left and the right should be able to agree that no one wins if corporate executives are permitted to abandon their obligations to shareholders in order to act as unelected, unappointed policy czars. Senator Rubio’s legislation should sound as a fire bell in the night to those executives.”
This has no chance of passing in this Congress, given that Democrats are in control of both chambers and corporate wokeness is a virtue in their books.
However, if and when the GOP is back in control of things, the Mind Your Own Business Act could force companies to make a tough choice: position themselves to mollify the left or create value for shareholders.