UCLA School of Law

Delaware Supreme Court Chief Justice Leo Strine and Nicholas Walter have recently published an article arguing that the U.S. Supreme Court’s decision in Citizens United v. FEC undermines a school of thought they call “conservative corporate law theory.” They argue that conservative corporate law theory justifies shareholder primacy on grounds that government regulation is a superior constraint on the externalities caused by corporate conduct than social responsibility norms. Because Citizens United purportedly has unleashed a torrent of corporate political campaign contributions intended to undermine regulations, they argue that the decision undermines the viability of conservative corporate law theory. As a result, they contend, Citizens United “logically supports the proposition that a corporation’s governing board must be free to think like any other citizen and put a value on things like the quality of the environment, the elimination of poverty, the alleviation of suffering among the ill, and other values that animate actual human beings.”This essay argues that Strine and Walker’s analysis is flawed in three major respects. First, “conservative corporate law theory” is a misnomer. They apply the term to such a wide range of thinkers as to make it virtually meaningless. More important, scholars who range across the political spectrum embrace shareholder primacy. Second, Strine and Walker likely overstate the extent to which Citizens United will result in significant erosion of the regulatory environment that constrains corporate conduct. Finally, the role of government regulation in controlling corporate conduct is just one of many arguments in favor of shareholder primacy. Many of those arguments would be valid even in a night watchman state in which corporate conduct is subject only to the constraints of property rights, contracts, and tort law. As such, even if Strine and Walker were right about the effect of Citizens United on the regulatory state, conservative corporate law theory would continue to favor shareholder primacy over corporate social responsibility.