William Galston Could Not Be More Wrong

Of course, it is true that the business judgment rule provides directors with wide discretion, and thus enables directors to justify–by reference to long-run stockholder interests–a number of decisions that may in fact be motivated more by a concern for a charity the CEO cares about, the community in which the corporate headquarters is located, or once in a while, even the company’s ordinary workers, rather than long-run stockholder wealth. But that does not alter the reality of what the law is. Dodge v. Ford and eBay are hornbook law because they make clear that if a fiduciary admits that he is treating an interest other than stockholder wealth as an end in itself, rather than an instrument to stockholder wealth, he is committing a breach of fiduciary duty. And these confession cases illustrate the very foundation for the business judgment rule itself.