News

Proposed Legislation to Address the Problem of Woke Corporations
Harvard Law School Forum on Corporate Governance
Senator Marco Rubio
October 6, 2021
 
The public support by large corporations for socially progressive ideologies, both in politics and business, has created a crisis of legitimacy for corporate America. By embracing the “woke” revolution that is politicizing nearly every area of Americans’ lives, corporate America has severely damaged its credibility with the rest of the country, and broken its relationship with conservatives and the Republican Party. This collapse of trust not only harms the health of our public life; it prevents large corporations from effectively serving the patriotic and necessary roles we need them to in order to advance the common good. It is time to change course.
 
To everyday working Americans, the examples of corporations pushing the woke revolution in our society are so plentiful that it should hardly require further explanation. But because it may be difficult to observe from the inside, a reminder of that in this forum may be helpful. According to a recent survey by American Compass, 63 percent of non-management workers want businesses to “focus on business and stay out of social justice issues” like “election reform, racial equity, and LGBTQ+ rights.” Among the workforce generally, those numbers went up to 66 percent of independents and 85 percent of Republicans. The greatest levels of support for companies taking a public stance on behalf of social justice were white, college-educated Democrats, at 77 percent. 
 
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Not only do these actions alienate the working public, they have severed the once constructive connection between corporate America and the conservative movement in politics. Much of the conservative consensus on economic policy relied upon the assumption that large corporations are good for our economy and society. Woke corporate policies undermine this assumption. As a result, conservatives are increasingly open to pursuing anti-corporate antitrust, tax, and labor law that, when combined with similar positions on such policies shared by the far left, could sharply reduce the profitability and influence of large corporations.
 
Though this outcome would be a necessary response to corporate America’s ongoing dereliction of its obligations to our nation, it would still represent a terrible lost opportunity. Successful and patriotic corporations helped make America a great and prosperous nation. And today, in our century-defining rivalry with China, we need patriotic corporations to advance our national interests, innovate, and employ workers in family-supporting jobs. That is why we must change course, before it is too late.
 
The best solution would be to have good and patriotic corporate leadership. But unfortunately, that is not what we have today. … 
 
That is why I recently introduced S. 2829, the Mind Your Own Business Act. This legislation would require large, publicly traded companies to amend their charters or bylaws to provide certain stockholders with procedural advantages in state law fiduciary duty litigation when the underlying corporate action at issue is a circumstance in which political conflicts of interest are likely, such as those we’ve seen in recent woke actions. …
 
In each circumstance my legislation would cover, there is an apparent “specter of political bias.” Compared to more ordinary exercises of business judgment, these circumstances make it more likely the action was based on political pressure, or the personal public image of corporate leadership, rather than the best interests of the corporation and its stockholders.
 
If a stockholder meeting the SEC’s stock ownership thresholds for including a shareholder proposal asserts a claim for breach of fiduciary duty under state law, the relevant defendant would bear the burden of proof with respect to any determination of business judgment and, if found in breach, be personally liable (without indemnification) for a minimum damages amount and attorney’s fees. 
 
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Political conflicts of interest can cause breaches of fiduciary duty, just like financial conflicts of interest. However, corporate leadership acts today as if they cannot. My legislation would help ensure shareholders are able to hold corporate leadership accountable for acting on these conflicts of interest by raising the risks associated with violating fiduciary duties in this particular way. I believe this would be an important first step toward realigning the governance of America’s large corporations with the national interest.
 
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