On a Lawsuit at Meta

Saying the Quiet Part Out Loud

On December 16, Meta made a little-noticed filing in response to a shareholder’s lawsuit against the Company and its directors.

While the filing has remained largely under the radar, it speaks volumes about the reality of the relationship between corporations and their shareholders and how that relationship threatens the economy, investors, and the world at large. In their zeal to protect Meta, the company’s lawyers have said the quiet part out loud, confirming that they believe the sole priority of a corporation is to maximize financial returns, regardless of the cost to the systems upon which its own diversified shareholders rely.

According to Meta’s filing with the Court, if it can maximize enterprise value by degrading the very systems that its investors rely upon to support their portfolios, it is legally required to do so. This reading of Delaware law would require directors and executives to make decisions that directly conflict with the interests of their own shareholders. Inconceivable? Read on.

The Lawsuit

The lawsuit claims the Company’s directors and officers violated their fiduciary duty to shareholders by prioritizing profit over all else. The claim is based on the fact that most shareholders diversify their investments to limit risk, and these diversified portfolios rely upon a healthy economy to prosper. But to boost its own profits, the lawsuit claims, Meta allows its platforms to be used to promote modern slavery, ethnic violence, organized crime, and vaccine disinformation. These activities threaten the diversified portfolios of Meta’s own shareholders by undermining the stability of the global economy.

Company Response

The Company’s response is nothing if not candid. It doesn’t deny that Meta prioritizes profits over the well-being of its users, the global economy, or its own diversified shareholder base. Instead, the Company argues that the job of a Delaware corporation and its directors is to maximize the value of its own shares, whatever the cost.

Specifically, Meta argues:

“Under well-settled Delaware law, Meta’s directors must govern the corporation so as to maximize long-term value for the corporation… Simply put, the Director Defendants have an ‘obligation to maximize the value of the corporation.’”

This defense directly contradicts proclamations by CEOs and others that corporations engage in “stakeholder capitalism,” where the interests of workers, the environment, communities, and others are balanced with shareholders’ interests. Meta itself makes this claim outside the courtroom: its website promises, “[w]e are committed to protecting what is truly important: the well-being of people and our planet.”

But in its response to the lawsuit, Meta makes it clear that this “commitment” is chimerical; its lawyers believe preserving people and planet cannot get in the way of maximizing the value of its shares of stock:

“While the Board can sometimes consider interests beyond those associated with increasing Meta’s profits in the short term, it may only do so when ‘giving consideration to them can be justified as benefiting [Meta] stockholders.'”
So much for its commitment to the “well-being of the people and the planet.”


The implications of Meta’s response are clear. Meta (and any other for-profit corporation) must continue to maximize its own value, whatever the cost to the economy and diversified shareholders. Meta is asserting that its executives cannot separately consider the harm it might be imposing on its own investors by degrading systems important to the economy.

The complaint made very specific allegations about that harm, and it’s important to understand that the Meta response assumes those allegations are true. Meta is arguing that if causing such harm maximized its financial value, its directors were precluded from considering the broader implications of these harms, even for its own shareholders’ portfolios. If Meta’s legal argument is correct, then its board can’t consider the broader portfolio impact of any of the factors alleged in the complaint, including that Meta’s platforms contribute to severe societal harm from vaccine hesitancy, enslavement and sex trafficking, drug cartel recruitment and intimidation, and genocide.

Accepting these assertions as true, Meta is arguing that even if they lead to harm to the global economy and even if that harm threatens the portfolios of its own diversified shareholders, directors can’t consider them unless they threaten the value of Meta.

The Conflict

The Meta response illustrates the conflict at the heart of our financial system. The insiders who run the company are highly rewarded with stock and bonuses when their own individual company succeeds financially. But this creates a conflict of interest because most shareholders are diversified, and don’t benefit if a company destroys broad economic value in its pursuit of profit.

In most corporations, shareholders can address this conflict through votes on directors and other matters. This is not the case at Meta, where Mark Zuckerberg, whose entire fortune is concentrated in Meta stock, has complete control through his ownership of special high-vote stock. This stock gives his minority interest complete control of the company; little wonder that Meta is arguing so strongly that it need not consider the impact its decisions have on its disenfranchised, diversified shareholders.

What’s Next

Since Meta has argued that the facts the shareholder alleges simply don’t add up to a breach of its directors’ duties, the Court will initially decide on this legal question. Both sides will file additional refinements of their arguments, and ultimately participate in oral arguments in front of the judge. The plaintiff filed an amended complaint in February, which you can read here.

Once those arguments are complete, the Court will issue a decision as to which side is right about the law. If the shareholder who sued is right, the next phase will be to gather evidence in anticipation of a trial over whether the board has, in fact, breached its duties by ignoring broad issues that affect diversified shareholders. If, on the other hand, the Court rules that the Company is correct, and that its directors are required to maximize Meta’s value regardless of the broader implications for its shareholders, then it will end the case (although that ruling would be subject to appeal). If this happens, diversified shareholders will need to consider how best to address the conflict between their interests and the interests of the corporate executives using their capital.