Targeting Corporate Political Activity Through Caremark

Corporations are increasingly active in the political realm. This is due in part to the strong First Amendment protections that corporations enjoy. This political activity, however, can also incur material risk; when corporations endorse political stances that their shareholder and consumer bases disagree with, they are often met with fallout that can impact their bottom line. Corporate political risk, as defined in this Note, is a meaningful threat to shareholders, who can experience material harm resulting from the corporation’s political activity. But the traditional corporate law remedy which relates to risk management—the fiduciary duty of good faith oversight as articulated by Caremark—is fairly narrow, and the burden on plaintiffs is heavy. It is unlikely that shareholders could bring a successful claim under Caremark for political risk management because of the limited doctrine. Therefore, this Note advocates for an expanded Caremark regime to address the harms of corporate political risk. A new Caremark framework for corporate political risk will advance two goals: (1) to better protect shareholders from material losses; and (2) to minimize the impact of corporate intervention in the American political process. Through shareholder protection, an expanded Caremark doctrine for political risk could serve to defang corporate political power in American democracy.