The Corporate Objective after eBay v. Newmark

Abstract

AbstractThe Delaware court's decision in eBay v. Newmark has been viewed by many commentators as a decisive affirmation of shareholder wealth maximization as the only legally permissible objective of a for‐profit corporation. The implications of this court case are of particular concern for the emerging field of social enterprise, in which some organizations, such as, in this case, Craigslist, choose to pursue a social benefit mission in the for‐profit corporate form. The eBay v. Newmark decision may also threaten companies that seek to be socially responsible by serving constituencies other than shareholders at the expense of some profit. This examination of the court decision concludes that a legal requirement to maximize shareholder value may not preclude a commitment to social responsibility and may even permit the pursuit of a social benefit objective, such as the preservation of the culture developed by Craigslist. In particular, the court's decision in eBay v. Newmark reflects unique features of the case that could have been avoided by Craigslist and by other similar companies.