Lawyers representing Meta and its CEO Mark Zuckerberg filed a motion in a Delaware court on Wednesday, requesting for the dismissal of a lawsuit brought by shareholders. The lawsuit makes unique allegations about the responsibilities of corporate leaders and argues that Meta’s directors should not only prioritize the interests of the company.

According to James McRitchie, the operator of a website dedicated to corporate governance and shareholder activism, the directors of Meta have failed in their obligations to the company by prioritizing profits over larger societal and economic concerns. This includes neglecting the investments of Meta shareholders in other companies.

Although Delaware law mandates that corporate directors must fulfill their fiduciary duty by prioritizing the interests of their stockholders and maximizing the value of their shares, lawyers representing McRitchie assert that Delaware courts should acknowledge a “portfolio theory” of corporate governance that considers external influences.

The argument is that Meta, the parent company of Facebook, Instagram, Messenger, and WhatsApp, has prioritized making profits over acknowledging the negative impact its products have on society and the global economy. This could potentially harm the investment portfolios of Meta’s shareholders who have also invested in other companies, according to critics.

Attorney Kurt Heyman emphasized the importance of considering the overall portfolio when making decisions, as he engaged in a lengthy discussion with Vice Chancellor J. Travis Laster and responded to numerous inquiries.

The lawsuit alleges that Meta’s social media platforms contribute to a variety of negative impacts, such as mental health issues among young users of Instagram, online human trafficking, “vaccine hesitancy,” encouragement of violence and harassment, deceptive or inaccurate political advertisements, and spreading of false information during elections.

McRitchie’s complaint argues that if a company’s decisions prioritize long-term cash flow but put the rule of law or public health at risk, the diverse stockholders’ portfolios will suffer financially as a result.

Meta’s attorneys argue that McRitchie’s allegations go against established Delaware corporate law and should be rejected completely. In their request for dismissal, they point out that, according to Delaware law, corporate directors are not required to prioritize or safeguard a shareholder’s investments in other companies. Although directors are allowed to take into account the interests of other stakeholders under Delaware’s “business judgment” rule, they are not obligated to do so.

Kramer, the attorney for Meta, informed Laster that the plaintiff’s assertions contradict fundamental principles of Delaware law.

The defense lawyers stated in a legal document that McRitchie is using his lawsuit against Meta as an opportunity to present his ideas on how he believes companies should function.

Kramer told Laster, “Our purpose is not to create laws. We are present solely for the purpose of a motion to dismiss.”

Laster did not make an immediate ruling, but he did acknowledge that regardless of his decision, the case will most likely be brought before the Supreme Court of Delaware.

Source: wral.com