Using the hot topic of gun violence as an illustration, this new memo: "Political and Social Issues in the Boardroom: Examples from the Gun Industry" from Hunton Andrews Kurth suggests a myriad of factors that may warrant the board's consideration in evaluating the impact on shareholder value and related business judgment rule protection associated with a particular response (which may deliberately consist of a non-response) to a political or social issue.
Among the potentially relevant factors identified for consideration are:
- The risk of consumer backlash or boycotts;
- The creation or loss of goodwill among customers or other key constituents;
- Public relations;
- Whether the issue actually poses legal liability to the company;
- The potential for short-term and long-term reputational harm; and
- The overall effects of the issue on the company’s business.
The memo also touches on the potential excludability of proposals under Rule 14a-8(i)(7) ("ordinary business" exception), and institutional investor and proxy advisory firm pressures.