In a recent post, UCLA Professor Stephen Bainbridge concludes: "And the law is that suits claiming woke directors breached their fiduciary duties by their decisions about how the corporation behaves in the political arena are non-starters".   While I generally agree that the business judgment rule will generally protect allegedly "woke" decisions by directors, I believe that there are at least two circumstances in which a plaintiff might conceivably succeed in a lawsuit challenging a board's allegedly "woke" decisionmaking.

First, some boards may adopt, approve or knowingly countenance policies that violate civil rights and other laws.  For example, California's Unruh Civil Rights Act prohibits discrimination based on protected categories, including sex, race, religion, and disability status.   Directors may in good faith believe that adoption of a discriminatory hiring policy will enhance corporate profits.  However, as Leo Strine famously penned in In re Massey, 2011 WL 2176479 (footnote omitted):  

Delaware law does not charter law breakers. Delaware law allows corporations to pursue diverse means to make a profit, subject to a critical statutory floor, which is the requirement that Delaware corporations only pursue “lawful business” by "lawful acts."   As a result, a fiduciary of a Delaware corporation cannot be loyal to a Delaware corporation by knowingly causing it to seek profit by violating the law.”

The business judgment rule does not protect breaches of the duty of loyalty.

The second situation is when the directors fail to meet the conditions for the application of the business judgment rule.  The business judgment rule, for example, will not protect directors when they fail to act on an informed basis or in good faith.  Smith v. Van Gorkom, 488 A.2d 858 (1985).   Thus, a plaintiff might have a "starter" if the plaintiff can adequately plead that a board failed to inform itself adequately before approving an allegedly "woke" corporate action.