Corporate Value(s)

*Saul A. Fox Distinguished Professor of Business Law, University of Pennsylvania Carey Law School, Fellow, European Corporate Governance Institute. We are grateful for helpful comments from David Kershaw and participants in the University of Amsterdam conference on Corporate Purpose: Yesterday and Today; the LSE Public Lecture — Corporate Value and the Role of Shareholders; the BYU 2026 Winter Deals Conference; the Marshall M. Criser Distinguished Faculty Workshop at the University of Florida Levin College of Law; the Penn Carey Law Faculty Ad Hoc; Closed and Open Companies: A False Dichotomy? Department of Law Unimore; and Corporate Governance and Technology in the ESG Era, Science and Research Centre (ZRS) Koper, Law Institute. **Hugh B. Brown Presidential Endowed Professor of Law, University of Utah, S.J. Quinney College of Law, Research Member, European Corporate Governance Institute.Show More

Introduction

Politics and values have critical importance in corporate decision-making, from questions at the core of a company’s existence, like whether it is morally appropriate to make and sell cigarettes or guns, to the routine, like whether to package products in plastic or paper. Long latent, values now take center stage as society has become more polarized, and issues such as diversity, clean energy, and charitable donations have become increasingly politicized. The growing salience of values poses challenges for corporate managers¹ 1.In the corporation, operational decisions are made by corporate officers under the direction and supervision of the board of directors. See, e.g., R. Franklin Balotti & Megan W. Shaner, Safe Harbor for Officer Reliance: Comparing the Approaches of the Model Business Corporation Act and Delaware’s General Corporation Law, 74 Law & Contemp. Probs., Winter 2011, at 161, 169 (“[G]iven the size and complexity of many modern corporations, actual operational control by the board of directors, itself, is frequently not feasible. . . . [As a result, t]he primary functions of management of the corporation generally are delegated to [senior officers].”). For purposes of simplicity, we will use the term “management” in this Article to refer to both officers and directors.Show More and corporate governance because economic value, not societal values, has long been the corporation’s raison d’être. In this Article, we provide a theory for how managers should confront values and how corporate governance can flex to accommodate values, in particular shareholder values, within its framework. The policy implications of this theory run counter to the key policy initiatives and marketplace innovations poised to reshape shareholder democracy.

Our view is contrary to those who argue that managers should put values first² 2.This perspective is perhaps most explicitly embraced in the corporate social responsibility movement, which argues that “corporations have a moral responsibility to voluntarily integrate . . . [ESG] improvements into their business operations for the benefit of shareholders, other stakeholders, society as a whole, and the environment.” Lynn M. LoPucki, Repurposing the Corporation Through Stakeholder Markets, 55 U.C. Davis L. Rev. 1445, 1447 (2022).Show More and who look to corporations as moral leaders that can potentially drive social change.³ 3.See, e.g., Jennifer S. Fan, Woke Capital: The Role of Corporations in Social Movements, 9 Harv. Bus. L. Rev. 441, 487 (2019) (“Corporations’ continued involvement in social movements is thus necessary both for the good of the corporations and for accomplishing the goals of the social movements themselves.”).Show More Corporations and corporate governance are ill-equipped for moral leadership.⁴ 4.There are some exceptions to this principle, including public benefit corporations; corporations that are controlled by a nonprofit or similar entity; corporations that incorporate a distinctive social mission into their business model, such as Patagonia; and private for-profit corporations, where all shareholders agree on the corporation’s mission. See generally Ofer Eldar & Mark Ørberg, The Anatomy of Nonprofit Control of Business Enterprise, 43 Yale J. on Regul. 335 (2026) (discussing the control by nonprofits of for-profit businesses).Show More Managers lack the expertise and legitimacy to select which values to back, and corporate governance lacks adequate accountability tools. As a result, corporate values commitments are often transient, inauthentic, and problematic.⁵ 5.See, e.g., Jill E. Fisch & Jeff Schwartz, How Did Corporations Get Stuck in Politics and Can They Escape?, 3 U. Chi. Bus. L. Rev. 325, 349–51 (2024) [hereinafter Fisch & Schwartz, Corporations in Politics] (describing corporate willingness to withdraw from controversial statements of values).Show More Recent history is rife with examples of corporate clumsiness and hypocrisy. Executives who lambasted President Trump and his policies a few years ago now line up to praise him.⁶ 6.For example, Tim Cook, the CEO of Apple, condemned President Trump’s responses to white nationalist rallies in Virginia in 2017. Apple Boss Tim Cook Joins Donald Trump Condemnation, BBC (Aug. 17, 2017), https://www.bbc.com/news/business-40958559 [https:‌//perma.cc/ZM64-LBVM]. In August 2025, however, Mr. Cook presented Mr. Trump with “a customized plaque with a 24-karat gold base.” Yasmin Khorram, ‘Kiss the Ring’: Silicon Valley CEOs Struggle to Respond to Trump’s Involvement in Their Businesses, Politico (Sep. 16, 2025, at 08:00 ET), https://www.politico.com/news/2025/09/16/silicon-valley-ceo-‌trump-business-00564524 [https://perma.cc/Q7PC-JSWJ]. At a White House dinner, he thanked the President nine times in two minutes. Id.Show More Corporate stalwarts of diversity now disclaim it.⁷ 7.See, e.g., Siddharth Cavale, Target Ending DEI Initiatives Amid Trump’s Order on Diversity Programs, Reuters (Jan. 24, 2025, at 19:20 ET), https://www.reuters.com/business/‌retail-consumer/target-ends-its-3-year-diversity-equity-inclusion-initiatives-2025-01-24 [http‌s://perma.cc/2F73-N8NF] (describing Target’s decision to end its diversity, equity, and inclusion (“DEI”) program); Conor Murray & Molly Bohannon, IBM Reportedly Walks Back Diversity Policies, Citing ‘Inherent Tensions’: Here Are All the Companies Rolling Back DEI Programs, Forbes (Apr. 11, 2025, at 11:27 ET), https://www.forbes.com/sites/con‌ormurray/2025/04/11/ibm-reportedly-walks-back-diversity-policies-citing-inherent-tensions-here-are-all-the-companies-rolling-back-dei-programs/ (listing companies that are “rolling back” their DEI programs).Show More

At the same time, however, the ubiquity of values-based considerations in ordinary operational decisions means that managers cannot ignore values or plausibly position their judgments as values-neutral. Another potential way to address values, as some have advocated, is to privilege shareholder views.⁸ 8.See, e.g., Oliver Hart & Luigi Zingales, Companies Should Maximize Shareholder Welfare Not Market Value, 2 J.L. Fin. & Acct. 247, 260–61 (2017); Oliver Hart & Luigi Zingales, The New Corporate Governance, 1 U. Chi. Bus. L. Rev. 195, 204 (2022) [hereinafter Hart & Zingales, The New Corporate Governance]; Caleb N. Griffin, Humanizing Corporate Governance, 75 Fla. L. Rev. 689, 720–21 (2023).Show More Since shareholders are the holders of the residual profit interests and voting rights, and the closest thing there are to “owners” of the firm, this makes some sense. But officer and director fiduciary duties run to the corporation, not to shareholders.⁹ 9.See, e.g., McRitchie v. Zuckerberg, 315 A.3d 518, 557 (Del. Ch. 2024) (“[D]irectors do not become fiduciaries for the stockholders as individuals. . . . The directors’ task is to grow . . . the value of the firm.”); N. Am. Cath. Educ. Programming Found., Inc. v. Gheewalla, 930 A.2d 92, 99 (Del. 2007) (rejecting argument that director fiduciary duties should be expanded to creditors).Show More Shareholders have no special claim to values supremacy. Further, shareholders have heterogeneous values,¹⁰ 10.See, e.g., Robert P. Bartlett III & Ryan Bubb, Corporate Social Responsibility Through Shareholder Governance, 97 S. Cal. L. Rev. 417, 446 (2024) (“[T]he social preferences of shareholders . . . are conflicted, muted, and often prefer less protection of stakeholder interests than provided by law.”). See generally Scott Hirst, Kobi Kastiel & Tamar Kricheli-Katz, How Much Do Investors Care About Social Responsibility?, 2023 Wis. L. Rev. 977 (conducting and describing an experiment demonstrating investor heterogeneity with respect to social preferences).Show More meaning that deference to shareholder values will frequently fail to provide a decisional tool, and implementing the will of the majority disserves those shareholders who disagree. Finally, shareholders lack the operational expertise to know how and when to incorporate values into business decisions. Deference to shareholders in this respect would usurp the role of management and upend corporate governance.

We also part ways with those, like current Securities and Exchange Commission (“SEC”) Chairman Paul Atkins, who discount the economic relevance of values.¹¹ 11.See, e.g., Paul S. Atkins, Chairman, Sec. & Exch. Comm’n, Keynote Address at the John L. Weinberg Center for Corporate Governance’s 25th Anniversary Gala (Oct. 9, 2025) [hereinafter Atkins, Keynote Address], https://www.sec.gov/newsroom/speeches-statements/‌atkins-10092025-keynote-address-john-l-weinberg-center-corporate-governances-25th-anniv‌ersary-gala [https://perma.cc/H5ZF-B63Z] (arguing that environmental and social shareholder proposals “frequently involve issues not material to the company’s business”); Vivek Ramaswamy, The ESG Fiduciary Gap, Harv. L. Sch. F. on Corp. Governance (Oct. 25, 2022), https://corpgov.law.harvard.edu/2022/10/25/the-esg-fiduciary-gap/ [https://perma.‌cc/56ZJ-8UD7] (arguing that asset managers’ promotion of ESG agendas is not in the interests of shareholders).Show More Instead, we argue that corporate values are inexorably linked to economic value and that managers should calibrate the corporation’s values to maximize the long-term value of the firm.¹² 12.Empirical work on the link between ESG and financial performance is mixed. See, e.g., Luis Jacob Escobar-Saldívar, Dacio Villarreal-Samaniego & Roberto J. Santillán-Salgado, The Effects of ESG Scores and ESG Momentum on Stock Returns and Volatility: Evidence from U.S. Markets, 18 J. Risk & Fin. Mgmt., no. 7, 2025, at 1, 2 (noting inconclusive findings with respect to the relationship between ESG ratings and financial performance). Aggregate statistics, however, mask the importance of values choices for individual firms.Show More A corporation’s position on values-related issues—even a position it has taken unintentionally by choosing to sell a product or hiring a spokesperson—may influence its reputation and, in turn, affect its cost of capital, the willingness of stakeholders, such as customers and employees, to engage with it, and its vulnerability to government regulation. Moreover, how values choices impact value is difficult to predict, and miscalculations may have significant economic consequences, as evidenced by the recent experiences of Bud Light,¹³ 13.According to one report, Bud Light lost over $1 billion in sales as a result of the backlash resulting from its partnership with a transgender influencer. Hanna Ziady, Bud Light Boycott Likely Cost Anheuser-Busch InBev Over $1 Billion in Lost Sales, CNN Bus. (Feb. 29, 2024, at 12:05 ET), https://www.cnn.com/2024/02/29/business/bud-light-boycott-a‌b-inbev-sales [https://perma.cc/DG7R-CTJ9].Show More Target,¹⁴ 14.Target lost $10 billion in market capitalization after customers boycotted in reaction to its sale of LGBTQ+-themed clothing. Ronny Reyes, Target Loses $10B in 10 Days as Stocks Fall Following Boycott over LGBTQ-Friendly Kids Clothing, N.Y. Post (May 28, 2023, at 22:08 ET), https://nypost.com/2023/05/28/target-loses-10b-following-boycott-calls-‌over-lgbtq-friendly-clothing/ [https://perma.cc/Q2M4-JTSC].Show More and Cracker Barrel,¹⁵ 15.Cracker Barrel’s stock fell nearly sixteen percent in the month following the controversy surrounding its rebranding. Juveria Tabassum, Cracker Barrel Shares Drop as Logo Change Blowback Dents Restaurant Traffic, Reuters (Sep. 18, 2025, at 14:39 ET), http‌s://www.reuters.com/business/cracker-barrel-shares-slump-logo-change-blowback-dents-rest‌aurant-traffic-2025-09-18/ [https://perma.cc/5B4T-7AVE]. Critics described the new logo as “woke.” Suzanne O’Halloran, Cracker Barrel Loses $143 Million in Market Value After Woke Brand Fiasco, Fox Bus. (Aug. 25, 2025, at 19:21 ET), https://www.foxbusiness.com/‌markets/cracker-barrels-loses-143-million-market-value-after-woke-brand-fiasco [https://per‌ma.cc/2J7T-S835].Show More all of which saw significant economic consequences from being caught wrong-footed on values issues.

The importance of values and the complexity of values-related decisions have structural implications for corporate governance. Like operational decisions, managers should be afforded great deference with respect to their values-related choices.¹⁶ 16.See, e.g., Stephen M. Bainbridge, Response, Director Primacy and Shareholder Disempowerment, 119 Harv. L. Rev. 1735, 1739–40 (2006).Show More As long as managers act in good faith on an informed basis, and in an effort to promote corporate value, their decisions are protected by the business judgment rule.¹⁷ 17.See Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984) (“The business judgment rule is . . . a presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.”).Show More Under Delaware law, how and the extent to which managers incorporate values into those decisions are treated no differently.¹⁸ 18.See, e.g., Simeone v. Walt Disney Co., 302 A.3d 956, 969–70 (Del. Ch. 2023) (“Although choosing to speak (or not speak) on public policy issues is an ordinary business decision, this case exemplifies the challenges a corporation faces when addressing divisive topics—particularly ones external to its business.”).Show More That is as things should be, and, as with other business decisions, managers should not face liability when, in hindsight, they miscalculated.

Because values decisions are so fraught, however, management cannot make them in a vacuum. The most important input comes from the company’s key stakeholders. Management’s job is to attune the corporation’s values to those of its stakeholders in a way that best serves the firm’s economic interests. We do not argue that managers should owe a fiduciary duty to stakeholders. Rather, they should take stakeholder views into account because they can significantly impact the company’s economic prospects. Employees quit and customers boycott when values are misaligned.¹⁹ 19.See Alex Christian, Are Workers Really Quitting Over Company Values?, BBC (Feb. 28, 2022), https://www.bbc.com/worklife/article/20220223-are-workers-really-quitting-over-‌company-values [https://perma.cc/2NB8-ZP3N] (discussing the importance of corporate values to workers and assessing how common it is for employees to quit over values); Ziady, supra note 13; Reyes, supra note 14; O’Halloran, supra note 15.Show More

The job of selecting a corporation’s values has become even more critical and difficult as the government has increasingly weighed in. In the last few years, state and federal authorities have targeted companies based on their political views and values.²⁰ 20.See infra text accompanying notes 64–67.Show More Managers now must consider the potential fallout from positioning the company’s values to oppose—or align with—those of the state.

Like other stakeholders, shareholders can inform management’s deliberations. Although shareholders have a common interest in firm value, both economic and noneconomic considerations affect shareholders’ investment decisions, as well as their participation in the governance of their portfolio companies. Their interest in both values and value makes them uniquely positioned to aid management in evaluating the impact of values-related decisions on firm value. Shareholder attitudes give insight into public values and the extent to which the embrace of values might involve a value tradeoff.

Because shareholders represent a cross-section of the public, they can enable management to more effectively gauge how the various stakeholders with which the firm interacts will view its decisions. Importantly, however, unlike outside stakeholders, shareholder concern for values is tempered by their concern for economic value, providing management with insight into how emphasizing certain values may impact returns. Finally, the ambiguity of how values impact value creates space for managers to insert their own values rather than deferring to corporate interests. Shareholder input can reduce this agency cost. In these ways, shareholder input is a valuable supplement to the communication by other stakeholders of their values-related preferences.

Yet it is difficult for shareholders to express their values to management. Exit and voice are the typical ways shareholders communicate their views, enabling management to distinguish between the concerns of special interest groups and the concerns of the broader shareholder base.²¹ 21.Albert O. Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States 4 (1970).Show More The nature of share ownership today, however, makes both exit and voice difficult. The vast majority of economic owners invest through intermediaries,²² 22.80% of Equity Market Cap Held by Institutions, Pensions & Invs. (Apr. 25, 2017, at 01:00 ET), https://www.pionline.com/article/20170425/INTERACTIVE/170429926/80-of-e‌quity-market-cap-held-by-institutions/.Show More and many adhere to index-based investment strategies,²³ 23.Richard A. Booth, Index Funds and the Duty to Diversify, Oxford Bus. L. Blog (Feb. 26, 2025), https://blogs.law.ox.ac.uk/oblb/blog-post/2025/02/index-funds-and-duty-diversify [https://perma.cc/22E7-A2FF] (“As of year-end 2023, index funds held 18% of the US stock market as compared to 13% held by actively managed mutual funds.”).Show More reducing their ability to exercise influence through exit, thus limiting the disciplinary effect of the capital markets. And although scholars have argued that institutional ownership enables investors to influence corporate decisions through voice,²⁴ 24.E.g., Eleonora Broccardo, Oliver Hart & Luigi Zingales, Exit Versus Voice, 130 J. Pol. Econ. 3101, 3102–04 (2022); John C. Coffee, Jr., Liquidity Versus Control: The Institutional Investor as Corporate Monitor, 91 Colum. L. Rev. 1277, 1366 (1991).Show More as we argue in other work, institutional voice is not a satisfactory solution when it comes to values.²⁵ 25.See generally Jill Fisch & Jeff Schwartz, Corporate Democracy and the Intermediary Voting Dilemma, 102 Tex. L. Rev. 1, 21 (2023) [hereinafter Fisch & Schwartz, Intermediary Voting Dilemma] (arguing that the increased focus on corporate values begets a need for input from fund shareholders in casting votes in portfolio firms).Show More Institutional intermediation of the public equity market obscures shareholder values, and what we have termed “beneficiary primacy” makes it more difficult for institutional investors to express the values of their shareholders.²⁶ 26.Jill Fisch & Jeff Schwartz, The Singular Role of Public Pension Funds in Corporate Governance, 104 Tex. L. Rev. 735, 738–39 (2026) [hereinafter Fisch & Schwartz, Singular Role].Show More We term these obstacles to shareholder voice “shareholder-side impediments.”

“Corporate-side impediments” further impede the ability of shareholders, even when they act as principals, to communicate on values. The director primacy model of corporate governance, which centers power in the board and leaves shareholders largely passive, is designed to exclude shareholders from operational decisions but also provides little space for the communication of shareholder values.²⁷ 27.Stephen M. Bainbridge, Director Primacy: The Means and Ends of Corporate Governance, 97 Nw. U. L. Rev. 547, 559 (2003).Show More Moreover, because the board’s consideration of values is within the scope of the business judgment rule, even a gross miscalculation cannot readily be addressed through litigation.²⁸ 28.See, e.g., Simeone v. Walt Disney Co., 302 A.3d 956, 971 (Del. Ch. 2023) (explaining that it is not the court’s role to “question rational judgments about how promoting non-stockholder interests . . . ultimately promote stockholder value”).Show More

Not only are these limitations problematic because they deprive management of valuable shareholder input, but they disadvantage shareholders relative to other stakeholder groups. Customers, employees, suppliers, the government,²⁹ 29.Including the government as a stakeholder is consistent with how the term is typically defined, as any party that can affect, or is affected by, the activities of the corporation. R. Edward Freeman, Strategic Management: A Stakeholder Approach 46 (1984); see, e.g., Aneil Kovvali & Joshua C. Macey, Private Profits and Public Business, 103 Tex. L. Rev. 711, 714 (2025) (describing significant government interventions into corporate affairs).Show More and even local communities³⁰ 30.See, e.g., Karen Kim, The Importance of Community Involvement, Frisco Chamber of Com. (Dec. 20, 2023), https://friscochamber.com/blog/the-importance-of-community-involv‌ement/ [https://perma.cc/FTM5-HK9T] (articulating the value to a corporation from engaging with the local community).Show More regularly engage with corporations on values-related issues, and that engagement is an important component of management’s decision-making process.³¹ 31.See, e.g., Heiko Spitzeck & Erik G. Hansen, Stakeholder Governance: How Stakeholders Influence Corporate Decision Making, 10 Corp. Governance 378, 380 (2010) (describing case studies demonstrating the impact of stakeholder engagement on operations).Show More These non-shareholder stakeholders are increasingly flexing their power when they disagree with a corporation’s values. Disney employees staged a series of walkouts and successfully persuaded the company to take a public stance opposing Florida’s so-called “Don’t Say Gay” legislation,³² 32.Joe Hernandez, Disney Workers Walk Out Over the Company’s Response to So-Called ‘Don’t Say Gay’ Bill, NPR (Mar. 22, 2022, at 12:23 ET), https://www.npr.org/2022/03/22/1‌088048998/disney-walkout-dont-say-gay-bill [https://perma.cc/A9FR-ASY9]. Disney management subsequently opposed the bill publicly. Sarah Whitten, Disney Vows to Help Repeal ‘Don’t Say Gay’ Law, Says Florida Gov. DeSantis Shouldn’t Have Signed It, CNBC (Mar. 28, 2022, at 20:24 ET), https://www.cnbc.com/2022/03/28/disney-vows-to-help-repeal‌-dont-say-gay-law.html [https://perma.cc/4XV8-UKF5].Show More a stance that led to costly economic sanctions by Governor Ron DeSantis and embroiled the company in litigation.³³ 33.See, e.g., Associated Press, Settlement Reached in Lawsuit Between Florida Gov. Ron DeSantis Allies and Disney, NBC News (Mar. 27, 2024, at 11:30 ET), https://www.nbcnews‌.com/business/business-news/disney-desantis-allies-reach-settlement-disney-district-control-‌rcna145289 [https://perma.cc/8D69-QCEZ] (describing background to settlement of litigation over legislation adopted “[a]s punishment for Disney’s opposition”).Show More Customers are also activists. According to a LendingTree survey, thirty-one percent of people have boycotted a company.³⁴ 34.Betty Lin-Fisher, Consumer Boycotts Continue: 31% Are Participating. See Where and Why, USA Today (July 6, 2025, at 17:06 ET), https://www.usatoday.com/story/money/2025‌/07/02/shoppers-boycott-retailers-dei-study/84388672007/ [https://perma.cc/28ZH-S98R].Show More Shareholders provide an important additional voice and should not face greater obstacles to engagement.

Concededly, shareholders retain the ultimate power to address management’s values choices with which they disagree through their ability to replace directors. Some commentators describe Engine No. 1’s success in replacing three directors at Exxon as an example of shareholder backlash against misaligned values with respect to climate change.³⁵ 35.See, e.g., Dan W. Puchniak & Umakanth Varottil, Climate-Related Shareholder Activism as Corporate Democracy: A Call to Reform Acting in Concert Rules, 50 J. Corp. L. 617, 618–19 (2025) (explaining that Engine No. 1’s successful proxy contest was “lauded by the ‘responsible investment community’”).Show More Such a response is, however, a blunt and expensive remedy. It is far more efficient to allow shareholders input into whether Starbucks charges a premium for nondairy milk, for example, than for the issue to be the subject of a contested director election.³⁶ 36.Geeyoung Min, Shareholder Direct Democracy, 74 Emory L.J. 381, 422 (2024) (stating that in 2024, following the submission of two shareholder proposals, “Starbucks announced the removal of the surcharge for non-dairy milk substitutes”).Show More

Because shareholders offer valuable information about how management should position corporate values, corporate law should facilitate values-related communications. Instead, there is significant contrary momentum. Rule 14a-8, the shareholder proposal rule, allows public company shareholders to submit proposals to an issuer and requires the issuer to include the proposals in its proxy materials provided certain conditions are met.³⁷ 37.17 C.F.R. § 240.14a-8 (2025).Show More The rule has traditionally been the primary mechanism for shareholders to communicate their values to management.³⁸ 38.See, e.g., James D. Cox & Randall S. Thomas, The SEC’s Shareholder Proposal Rule: Creating a Corporate Public Square, 2021 Colum. Bus. L. Rev. 1147, 1147–48 (defending the shareholder proposal rule as enabling shareholders to communicate their views to management and to each other).Show More Yet the SEC is poised to limit Rule 14a-8,³⁹ 39.Agency Rule List – Spring 2025: Securities and Exchange Commission, Off. of Info. & Regul. Affs., https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_G‌ET_AGENCY_RULE_LIST¤tPub=true&agencyCode=&showStage=active&agency‌Cd=3235 [https://perma.cc/URR3-6URR] (last visited May 15, 2026) (listing “Shareholder Proposal Modernization” as in the proposed rule stage); View Rule – Shareholder Proposal Modernization, Off. of Info. & Regul. Affs. [hereinafter Shareholder Proposal Modernization], https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202504&RI‌N=3235-AN47 [https://perma.cc/B7M4-FCEY] (last visited May 15, 2026) (stating that the rules would “modernize the requirements of Exchange Act Rule 14a-8 to reduce compliance burdens for registrants and account for developments since the rule was last amended”).Show More and Congress is considering repeal.⁴⁰ 40.Prioritizing Economic Growth Over Woke Policies Act, H.R. 4790, 118th Cong. § 3201 (2024).Show More Finally, in an October 2025 speech, Chairman Atkins called into question the continued viability of the shareholder proposal rule, endorsing a controversial theory challenging the state law basis for precatory (non-binding) shareholder proposals⁴¹ 41.Atkins, Keynote Address, supra note 11.Show More—the form taken by nearly all such proposals.⁴² 42.‘We Will Get By, We Will Survive’—The Future of Shareholder Proposals, Cooley (Dec. 3, 2025) [hereinafter Future of Shareholder Proposals], https://www.cooley.com/news/‌insight/2025/2025-12-03-we-will-get-by-we-will-survive–the-future-of-shareholder-propos‌als [https://perma.cc/HS7R-U3UR] (“In the last three years, nearly 3,000 shareholder proposals were submitted to Russell 3000 companies, and fewer than 20 were binding proposals.”); Sanford Lewis & Khadija Foda, The SEC, Delaware and the High Stakes for Investors on Advisory Shareholder Proposals, Harv. L. Sch. F. on Corp. Governance (Nov. 20, 2025), https://corpgov.law.harvard.edu/2025/11/20/the-sec-delaware-and-the-high-stakes‌-for-investors-on-advisory-shareholder-proposals/ [https://perma.cc/54BR-HNFE] (“A 2007 Institutional Shareholder Services report noted that non-binding proposals accounted for 98% of the total shareholder resolutions in the US in that year. In our experience, that ratio remains approximately the same today.”).Show More

We argue that dismantling the shareholder proposal rule would be a mistake because it would destroy corporate value.⁴³ 43.Although commentators disagree on the extent to which precatory proposals have an economic impact on issuers, there is evidence that such proposals, including ESG proposals, are correlated with increased firm economic value. See Interfaith Ctr. on Corp. Resp. v. SEC, 786 F. Supp. 3d 97, 129 (D.D.C. 2025) (describing data presented to SEC on the economic value of ESG proposals).Show More Given the increased significance of values to corporate decision-making, the shareholder proposal rule is more important today than ever. Current efforts to revise the rule are rooted largely in the perception that it is overly permissive, particularly with respect to environmental and social issues, allowing for proposals that are, in some cases, overly prescriptive, economically immaterial to an issuer, and unpopular with other shareholders. We acknowledge these concerns and identify modest safeguards to address them, such as invigorating the prohibition on proposals that attempt to micromanage issuers and imposing more significant limitations on repeat proposals.

We also criticize the current trend of mutual fund sponsors toward implementing voting choice programs through which they shift voting responsibility to proxy advisors and shareholders. While these programs are promoted as mechanisms to enhance corporate democracy, they are crude instruments for conveying shareholder values, and they lessen the effectiveness of intermediaries in addressing the collective action challenges individual fund shareholders face. Instead, we argue that mutual funds and other financial intermediaries should retain voting power but be required to solicit and reflect the views of their shareholders on values-related matters.

This Article proceeds as follows. In Part I, we explain the economic importance of values to corporate operations. Part II considers how managers should weigh values into corporate decisions, concluding that they should be included as part of the long-term value calculus. Part III shows how the communication of shareholders’ values-based preferences—as with the communication of other stakeholder values—can improve the ability of directors to enhance corporate value. Part IV describes the role of shareholder-side impediments and corporate-side impediments in constraining shareholders from communicating and effectuating their value choices on the corporation. Part V demonstrates the implications of our analysis for reform of the shareholder proposal rule and voting choice programs.

1.  In the corporation, operational decisions are made by corporate officers under the direction and supervision of the board of directors. See, e.g., R. Franklin Balotti & Megan W. Shaner, Safe Harbor for Officer Reliance: Comparing the Approaches of the Model Business Corporation Act and Delaware’s General Corporation Law, 74 Law
   

   &

   Contemp. Probs., Winter 2011, at 161, 169 (“[G]iven the size and complexity of many modern corporations, actual operational control by the board of directors, itself, is frequently not feasible. . . . [As a result, t]he primary functions of management of the corporation generally are delegated to [senior officers].”). For purposes of simplicity, we will use the term “management” in this Article to refer to both officers and directors. ↑

2.  This perspective is perhaps most explicitly embraced in the corporate social responsibility movement, which argues that “corporations have a moral responsibility to voluntarily integrate . . . [ESG] improvements into their business operations for the benefit of shareholders, other stakeholders, society as a whole, and the environment.” Lynn M. LoPucki, Repurposing the Corporation Through Stakeholder Markets, 55 U.C. Davis L. Rev. 1445, 1447 (2022). ↑
3.  See, e.g., Jennifer S. Fan, Woke Capital: The Role of Corporations in Social Movements, 9 Harv. Bus. L. Rev. 441, 487 (2019) (“Corporations’ continued involvement in social movements is thus necessary both for the good of the corporations and for accomplishing the goals of the social movements themselves.”). ↑
4.  There are some exceptions to this principle, including public benefit corporations; corporations that are controlled by a nonprofit or similar entity; corporations that incorporate a distinctive social mission into their business model, such as Patagonia; and private for-profit corporations, where all shareholders agree on the corporation’s mission. See generally Ofer Eldar & Mark Ørberg, The Anatomy of Nonprofit Control of Business Enterprise, 43 Yale J. on Regul. 335 (2026) (discussing the control by nonprofits of for-profit businesses). ↑
5.  See, e.g., Jill E. Fisch & Jeff Schwartz, How Did Corporations Get Stuck in Politics and Can They Escape?, 3 U. Chi. Bus. L. Rev. 325, 349–51 (2024) [hereinafter Fisch & Schwartz, Corporations in Politics] (describing corporate willingness to withdraw from controversial statements of values). ↑
6.  For example, Tim Cook, the CEO of Apple, condemned President Trump’s responses to white nationalist rallies in Virginia in 2017. Apple Boss Tim Cook Joins Donald Trump Condemnation, BBC (Aug. 17, 2017), https://www.bbc.com/news/business-40958559 [https:‌//perma.cc/ZM64-LBVM]. In August 2025, however, Mr. Cook presented Mr. Trump with “a customized plaque with a 24-karat gold base.” Yasmin Khorram, ‘Kiss the Ring’: Silicon Valley CEOs Struggle to Respond to Trump’s Involvement in Their Businesses, Politico (Sep. 16, 2025, at 08:00 ET), https://www.politico.com/news/2025/09/16/silicon-valley-ceo-‌trump-business-00564524 [https://perma.cc/Q7PC-JSWJ]. At a White House dinner, he thanked the President nine times in two minutes. Id. ↑
7.  See, e.g., Siddharth Cavale, Target Ending DEI Initiatives Amid Trump’s Order on Diversity Programs, Reuters (Jan. 24, 2025, at 19:20 ET), https://www.reuters.com/business/‌retail-consumer/target-ends-its-3-year-diversity-equity-inclusion-initiatives-2025-01-24 [http‌s://perma.cc/2F73-N8NF] (describing Target’s decision to end its diversity, equity, and inclusion (“DEI”) program); Conor Murray & Molly Bohannon, IBM Reportedly Walks Back Diversity Policies, Citing ‘Inherent Tensions’: Here Are All the Companies Rolling Back DEI Programs, Forbes (Apr. 11, 2025, at 11:27 ET), https://www.forbes.com/sites/con‌ormurray/2025/04/11/ibm-reportedly-walks-back-diversity-policies-citing-inherent-tensions-here-are-all-the-companies-rolling-back-dei-programs/ (listing companies that are “rolling back” their DEI programs). ↑
8.  See, e.g., Oliver Hart & Luigi Zingales, Companies Should Maximize Shareholder Welfare Not Market Value, 2 J.L. Fin. & Acct. 247, 260–61 (2017); Oliver Hart & Luigi Zingales, The New Corporate Governance, 1 U. Chi. Bus. L. Rev. 195, 204 (2022) [hereinafter Hart & Zingales, The New Corporate Governance]; Caleb N. Griffin, Humanizing Corporate Governance, 75 Fla. L. Rev. 689, 720–21 (2023). ↑
9.  See, e.g., McRitchie v. Zuckerberg, 315 A.3d 518, 557 (Del. Ch. 2024) (“[D]irectors do not become fiduciaries for the stockholders as individuals. . . . The directors’ task is to grow . . . the value of the firm.”); N. Am. Cath. Educ. Programming Found., Inc. v. Gheewalla, 930 A.2d 92, 99 (Del. 2007) (rejecting argument that director fiduciary duties should be expanded to creditors). ↑
10.  See, e.g., Robert P. Bartlett III & Ryan Bubb, Corporate Social Responsibility Through Shareholder Governance, 97 S. Cal. L. Rev. 417, 446 (2024) (“[T]he social preferences of shareholders . . . are conflicted, muted, and often prefer less protection of stakeholder interests than provided by law.”). See generally Scott Hirst, Kobi Kastiel & Tamar Kricheli-Katz, How Much Do Investors Care About Social Responsibility?, 2023 Wis. L. Rev. 977 (conducting and describing an experiment demonstrating investor heterogeneity with respect to social preferences). ↑
11.  See, e.g., Paul S. Atkins, Chairman, Sec. & Exch. Comm’n, Keynote Address at the John L. Weinberg Center for Corporate Governance’s 25th Anniversary Gala (Oct. 9, 2025) [hereinafter Atkins, Keynote Address], https://www.sec.gov/newsroom/speeches-statements/‌atkins-10092025-keynote-address-john-l-weinberg-center-corporate-governances-25th-anniv‌ersary-gala [https://perma.cc/H5ZF-B63Z] (arguing that environmental and social shareholder proposals “frequently involve issues not material to the company’s business”); Vivek Ramaswamy, The ESG Fiduciary Gap, Harv. L. Sch. F. on Corp. Governance (Oct. 25, 2022), https://corpgov.law.harvard.edu/2022/10/25/the-esg-fiduciary-gap/ [https://perma.‌cc/56ZJ-8UD7] (arguing that asset managers’ promotion of ESG agendas is not in the interests of shareholders). ↑
12.  Empirical work on the link between ESG and financial performance is mixed. See, e.g., Luis Jacob Escobar-Saldívar, Dacio Villarreal-Samaniego & Roberto J. Santillán-Salgado, The Effects of ESG Scores and ESG Momentum on Stock Returns and Volatility: Evidence from U.S. Markets, 18 J. Risk & Fin. Mgmt., no. 7, 2025, at 1, 2 (noting inconclusive findings with respect to the relationship between ESG ratings and financial performance). Aggregate statistics, however, mask the importance of values choices for individual firms. ↑
13.  According to one report, Bud Light lost over $1 billion in sales as a result of the backlash resulting from its partnership with a transgender influencer. Hanna Ziady, Bud Light Boycott Likely Cost Anheuser-Busch InBev Over $1 Billion in Lost Sales, CNN Bus. (Feb. 29, 2024, at 12:05 ET), https://www.cnn.com/2024/02/29/business/bud-light-boycott-a‌b-inbev-sales [https://perma.cc/DG7R-CTJ9]. ↑
14.  Target lost $10 billion in market capitalization after customers boycotted in reaction to its sale of LGBTQ+-themed clothing. Ronny Reyes, Target Loses $10B in 10 Days as Stocks Fall Following Boycott over LGBTQ-Friendly Kids Clothing, N.Y. Post (May 28, 2023, at 22:08 ET), https://nypost.com/2023/05/28/target-loses-10b-following-boycott-calls-‌over-lgbtq-friendly-clothing/ [https://perma.cc/Q2M4-JTSC]. ↑
15.  Cracker Barrel’s stock fell nearly sixteen percent in the month following the controversy surrounding its rebranding. Juveria Tabassum, Cracker Barrel Shares Drop as Logo Change Blowback Dents Restaurant Traffic, Reuters (Sep. 18, 2025, at 14:39 ET), http‌s://www.reuters.com/business/cracker-barrel-shares-slump-logo-change-blowback-dents-rest‌aurant-traffic-2025-09-18/ [https://perma.cc/5B4T-7AVE]. Critics described the new logo as “woke.” Suzanne O’Halloran, Cracker Barrel Loses $143 Million in Market Value After Woke Brand Fiasco, Fox Bus. (Aug. 25, 2025, at 19:21 ET), https://www.foxbusiness.com/‌markets/cracker-barrels-loses-143-million-market-value-after-woke-brand-fiasco [https://per‌ma.cc/2J7T-S835]. ↑
16.  See, e.g., Stephen M. Bainbridge, Response, Director Primacy and Shareholder Disempowerment, 119 Harv. L. Rev. 1735, 1739–40 (2006). ↑
17.  See Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984) (“The business judgment rule is . . . a presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.”). ↑
18.  See, e.g., Simeone v. Walt Disney Co., 302 A.3d 956, 969–70 (Del. Ch. 2023) (“Although choosing to speak (or not speak) on public policy issues is an ordinary business decision, this case exemplifies the challenges a corporation faces when addressing divisive topics—particularly ones external to its business.”). ↑
19.  See Alex Christian, Are Workers Really Quitting Over Company Values?, BBC (Feb. 28, 2022), https://www.bbc.com/worklife/article/20220223-are-workers-really-quitting-over-‌company-values [https://perma.cc/2NB8-ZP3N] (discussing the importance of corporate values to workers and assessing how common it is for employees to quit over values); Ziady, supra note 13; Reyes, supra note 14; O’Halloran, supra note 15. ↑
20.  See infra text accompanying notes 64–67. ↑
21.  Albert O. Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States 4 (1970). ↑
22.  80% of Equity Market Cap Held by Institutions, Pensions & Invs. (Apr. 25, 2017, at 01:00 ET), https://www.pionline.com/article/20170425/INTERACTIVE/170429926/80-of-e‌quity-market-cap-held-by-institutions/. ↑
23.  Richard A. Booth, Index Funds and the Duty to Diversify, Oxford Bus. L. Blog (Feb. 26, 2025), https://blogs.law.ox.ac.uk/oblb/blog-post/2025/02/index-funds-and-duty-diversify [https://perma.cc/22E7-A2FF] (“As of year-end 2023, index funds held 18% of the US stock market as compared to 13% held by actively managed mutual funds.”). ↑
24.  E.g., Eleonora Broccardo, Oliver Hart & Luigi Zingales, Exit Versus Voice, 130 J. Pol. Econ. 3101, 3102–04 (2022); John C. Coffee, Jr., Liquidity Versus Control: The Institutional Investor as Corporate Monitor, 91 Colum. L. Rev. 1277, 1366 (1991). ↑
25.  See generally Jill Fisch & Jeff Schwartz, Corporate Democracy and the Intermediary Voting Dilemma, 102 Tex. L. Rev. 1, 21 (2023) [hereinafter Fisch & Schwartz, Intermediary Voting Dilemma] (arguing that the increased focus on corporate values begets a need for input from fund shareholders in casting votes in portfolio firms). ↑
26.  Jill Fisch & Jeff Schwartz, The Singular Role of Public Pension Funds in Corporate Governance, 104 Tex. L. Rev. 735, 738–39 (2026) [hereinafter Fisch & Schwartz, Singular Role]. ↑
27.  Stephen M. Bainbridge, Director Primacy: The Means and Ends of Corporate Governance, 97 Nw. U. L. Rev.
    

    547,

    559

    (2003).

    ↑

28.  See, e.g., Simeone v. Walt Disney Co., 302 A.3d 956, 971 (Del. Ch. 2023) (explaining that it is not the court’s role to “question rational judgments about how promoting non-stockholder interests . . . ultimately promote stockholder value”). ↑
29.  Including the government as a stakeholder is consistent with how the term is typically defined, as any party that can affect, or is affected by, the activities of the corporation. R. Edward Freeman, Strategic Management: A Stakeholder Approach 46 (1984); see, e.g., Aneil Kovvali & Joshua C. Macey, Private Profits and Public Business, 103 Tex. L. Rev. 711, 714 (2025) (describing significant government interventions into corporate affairs). ↑
30.  See, e.g., Karen Kim, The Importance of Community Involvement, Frisco Chamber of Com. (Dec. 20, 2023), https://friscochamber.com/blog/the-importance-of-community-involv‌ement/ [https://perma.cc/FTM5-HK9T] (articulating the value to a corporation from engaging with the local community). ↑
31.  See, e.g., Heiko Spitzeck & Erik G. Hansen, Stakeholder Governance: How Stakeholders Influence Corporate Decision Making,
    

    10

    Corp. Governance 378, 380 (2010) (describing case studies demonstrating the impact of stakeholder engagement on operations). ↑

32.  Joe Hernandez, Disney Workers Walk Out Over the Company’s Response to So-Called ‘Don’t Say Gay’ Bill, NPR (Mar. 22, 2022, at 12:23 ET), https://www.npr.org/2022/03/22/1‌088048998/disney-walkout-dont-say-gay-bill [https://perma.cc/A9FR-ASY9]. Disney management subsequently opposed the bill publicly. Sarah Whitten, Disney Vows to Help Repeal ‘Don’t Say Gay’ Law, Says Florida Gov. DeSantis Shouldn’t Have Signed It, CNBC (Mar. 28, 2022, at 20:24 ET), https://www.cnbc.com/2022/03/28/disney-vows-to-help-repeal‌-dont-say-gay-law.html [https://perma.cc/4XV8-UKF5]. ↑
33.  See, e.g., Associated Press, Settlement Reached in Lawsuit Between Florida Gov. Ron DeSantis Allies and Disney, NBC News (Mar. 27, 2024, at 11:30 ET), https://www.nbcnews‌.com/business/business-news/disney-desantis-allies-reach-settlement-disney-district-control-‌rcna145289 [https://perma.cc/8D69-QCEZ] (describing background to settlement of litigation over legislation adopted “[a]s punishment for Disney’s opposition”). ↑
34.  Betty Lin-Fisher, Consumer Boycotts Continue: 31% Are Participating. See Where and Why, USA Today (July 6, 2025, at 17:06 ET), https://www.usatoday.com/story/money/2025‌/07/02/shoppers-boycott-retailers-dei-study/84388672007/ [https://perma.cc/28ZH-S98R]. ↑
35.  See, e.g., Dan W. Puchniak & Umakanth Varottil, Climate-Related Shareholder Activism as Corporate Democracy: A Call to Reform Acting in Concert Rules, 50 J. Corp. L
    

    .

    617, 618–19 (2025) (explaining that Engine No. 1’s successful proxy contest was “lauded by the ‘responsible investment community’”). ↑

36.  Geeyoung Min, Shareholder Direct Democracy, 74 Emory L.J. 381, 422 (2024) (stating that in 2024, following the submission of two shareholder proposals, “Starbucks announced the removal of the surcharge for non-dairy milk substitutes”). ↑
37.  17 C.F.R. § 240.14a-8 (2025). ↑
38.  See, e.g., James D. Cox & Randall S. Thomas, The SEC’s Shareholder Proposal Rule: Creating a Corporate Public Square, 2021 Colum. Bus. L. Rev. 1147, 1147–48 (defending the shareholder proposal rule as enabling shareholders to communicate their views to management and to each other). ↑
39.  Agency Rule List – Spring 2025: Securities and Exchange Commission, Off. of Info. & Regul. Affs., https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_G‌ET_AGENCY_RULE_LIST&currentPub=true&agencyCode=&showStage=active&agency‌Cd=3235 [https://perma.cc/URR3-6URR] (last visited May 15, 2026) (listing “Shareholder Proposal Modernization” as in the proposed rule stage); View Rule – Shareholder Proposal Modernization, Off. of Info. & Regul. Affs. [hereinafter Shareholder Proposal Modernization], https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202504&RI‌N=3235-AN47 [https://perma.cc/B7M4-FCEY] (last visited May 15, 2026) (stating that the rules would “modernize the requirements of Exchange Act Rule 14a-8 to reduce compliance burdens for registrants and account for developments since the rule was last amended”). ↑
40.  Prioritizing Economic Growth Over Woke Policies Act, H.R. 4790, 118th Cong. § 3201 (2024). ↑
41.  Atkins, Keynote Address, supra note 11. ↑
42.  ‘We Will Get By, We Will Survive’—The Future of Shareholder Proposals, Cooley
    

    (

    Dec. 3, 2025) [hereinafter Future of Shareholder Proposals], https://www.cooley.com/news/‌insight/2025/2025-12-03-we-will-get-by-we-will-survive–the-future-of-shareholder-propos‌als [https://perma.cc/HS7R-U3UR] (“In the last three years, nearly 3,000 shareholder proposals were submitted to Russell 3000 companies, and fewer than 20 were binding proposals.”); Sanford Lewis & Khadija Foda, The SEC, Delaware and the High Stakes for Investors on Advisory Shareholder Proposals, Harv. L. Sch. F. on Corp. Governance (Nov. 20, 2025), https://corpgov.law.harvard.edu/2025/11/20/the-sec-delaware-and-the-high-stakes‌-for-investors-on-advisory-shareholder-proposals/ [https://perma.cc/54BR-HNFE] (“A 2007 Institutional Shareholder Services report noted that non-binding proposals accounted for 98% of the total shareholder resolutions in the US in that year. In our experience, that ratio remains approximately the same today.”). ↑

43.  Although commentators disagree on the extent to which precatory proposals have an economic impact on issuers, there is evidence that such proposals, including ESG proposals, are correlated with increased firm economic value. See Interfaith Ctr. on Corp. Resp. v. SEC, 786 F. Supp. 3d 97, 129 (D.D.C. 2025) (describing data presented to SEC on the economic value of ESG proposals). ↑