Abby Lemert (Yale Law School) has posted “Facebook’s Corporate Law Paradox” on SSRN. Here is the abstract:
In response to the digital harms created by Facebook’s platforms, lawmakers, the media, and academics repeatedly demand that the company stop putting “profits before people.” But these commentators have consistently overlooked the ways in which Delaware corporate law disincentives and even prohibits Facebook’s directors from prioritizing the public interest. Because Facebook experiences the majority of the harms it creates as negative externalities, Delaware’s unflinching commitment to shareholder primacy prevents Facebook’s directors from making unprofitable decisions to redress those harms. Even Facebook’s attempt to delegate decision-making authority to the independent Oversight Board verges on an unlawful abdication of corporate director fiduciary duties. Facebook’s experience casts doubt on the prospects for effective corporate self-regulation of content moderation, and more broadly, on the ability of existing corporate law to incentivize or even allow social media companies to meaningfully redress digital harms.