2012
THE NEXT BIG THING: FLEXIBLE PURPOSE CORPORATIONS
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provisions regarding FPC operations. We can start with director discretion. The statute provides that: In discharging his or her duties, a director may consider those factors, and give weight to those factors, as the director deems relevant, including the short-term and long-term prospects of the flexible purpose corporation, the best interests of the flexible purpose corporation and its shareholders, and the purposes of the flexible purpose corporation as set forth in its articles.56
This language was intended to make clear that FPC directors may pursue purposes beyond, and even in conflict with, shareholder value maximization.57 The FPC statute codifies protection from liability when directors carry out their duties within the confines of this additional discretion.58 In addition, individual FPCs may limit or eliminate their directors ’ exposure to monetary damages by adopting exculpatory charter amendments.59 Finally, the statute expressly disclaims any grant of standing to non-shareholder stakeholders to challenge directorial action.60 FPC directors are permitted to consider their articulated purposes, but shareholders alone may challenge their operational decisions.61 Considering the FPC ’s origins, it is not surprising that constituency statutes share many of these attributes. Constituency statutes also broaden directors ’ permissible considerations beyond the perceived strictures of the shareholder value maximization norm.62 Constituency statutes, however, are also subject to a powerful, unintended consequences critique. By expanding directorial discretion so widely, they may allow directors to mask mismanagement and even malfeasance.63 If the sweep of a
56. 57. 58. 59. 60. 61.
CAL. CORP. CODE § 2700(c). Britt, Johnson & MacCormac, supra note 35. See CAL. CORP. CODE § 2700(d). Id. See id. § 2700(f). Although the statute expressly renounces any negation of the Attorney General ’s power to police charitable trusts, it states “a flexible purpose corporation shall not be deemed to hold any of its assets for the benefit of any party other than its shareholders ” and does not contemplate creating any new supervisory role for existing regulators. See id. § 2700(e). 62. See supra notes 29 & 30 and accompanying text. 63. See Rutherford B. Campbell, Jr., Corporate Fiduciary Principles for the PostContractarian Era, 23 FLA. ST. U. L. REV. 561, 621 –23 (1996) (making this criticism and noting the wider debate); Brett H. McDonnell, Corporate Constituency Statutes and Employee Governance, 30 WM. MITCHELL L. REV. 1227, 1231 –36 (2004) (reviewing the literature on constituency statutes).