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Intermediate scrutiny
Intermediate scrutiny





intermediate scrutiny

Therefore, by analogy to Unocal, a court evaluating a corporate political contribution should ask (1) whether management had reasonable grounds to believe that the contribution would directly or indirectly advance specific corporate interests, rather than some general political viewpoint and (2) whether the contribution was reasonable, both as a method of addressing the specific corporate interest and in its amount. Indeed, although corporate Super PAC contributions do not pose an inherent conflict between management and the corporation, the possibility of pretext is so great that there is an “omnipresent specter” that management will serve its own purposes whenever it causes the corporation to make a political contribution. Second, upon closer review, corporate Super PAC contributions give rise to greater agency cost concerns than corporate charitable gifts, due to the increased potential of management pretext in the former context.

intermediate scrutiny

These same concerns led prior commentators to propose applying intermediate scrutiny to charitable contributions post- Citizens United, this proposal should be updated to include corporate political contributions. First, like corporate charitable donations, corporate political contributions give rise to serious agency cost concerns. Under Unocal, management must earn the protection of the business judgment rule by establishing the reasonableness and proportionality of its defensive actions.Ĭourts evaluating management’s decision to make a Super PAC contribution should apply Unocal for two related reasons. Delaware courts apply Unocal to defensive measures due to the “omnipresent specter” that management will promote its own interests over the corporation’s best interests. Instead, courts should apply the intermediate level of scrutiny-the Unocal test-that is applied whenever management adopts defensive measures in the face of a hostile takeover. This Article departs from the scholarly consensus that courts should apply the business judgment rule to review corporate political contributions. Thus, absent a “smoking gun” that points to bad faith, it will be extremely difficult for a shareholder to prove that management has acted disloyally. Further, management can easily concoct a justification for supporting any major-party political candidate. Unfortunately for our shareholder plaintiff, this rule presumes that management acts rationally, without a conflict of interest, and in good faith. Myriad scholars have opined that the court will apply the standard of review for ordinary business decisions: the management-friendly business judgment rule. What standard will a Delaware court apply when reviewing management’s decision to cause the corporation to make the contribution? A shareholder sues, alleging that management breached its duty of loyalty by making the contribution to promote its own political views rather than to serve the corporation’s best interests-i.e., by acting in bad faith.

intermediate scrutiny

A corporation contributes to a Super PAC that supports a candidate for public office.







Intermediate scrutiny