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Hastings Business Law Journal

Authors

David Rosenberg

Abstract

This article argues that legislation that provide "special rules" is not necessary because the business judgment rule should not be interpreted to protect corporate directors' decisions to donate to political campaigns in the same way that it protects ordinary corporate charitable contributions or decisions based on CSR. The rule protects donations in the public interest even if they are profit- sacrificing because courts are not in a position to judge whether or not a particular act of giving is designed to maximize profits or is simply an acceptable act of charity with no obvious financial benefit to the corporation itself. We ought to tolerate the latter both because we do not want courts evaluating a corporation's strategy to create goodwill in the community and because we have no reason to discourage true acts of altruism by American businesses. An act of political giving, however, seems to be based on only two possible motivations, one of which we should not tolerate. First, it might have a pure business purpose by helping to elect politicians whose policies will be favorable to the corporation. Second, it might reflect the self- interest of the corporate directors and officers. This self-interest might take the form of supporting certain politicians because they reflect the decision-makers' own views or because the decision- makers stand to gain from the politicians' policies. Alternatively, the self-interest might arise from the director or manager's hope of receiving a personal benefit in a quid pro quo for their support. Political donations do not seem to fit into a third category of pure philanthropy so often used to justify judicial resistance to reviewing charitable giving by corporations.

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