Florida Government Ron DeSantis‘ strange threats to investigate and can sue Bud Light’s parent company on behalf of the Florida pension fund are confused and completely useless.
In a recent time Fox News appeared, he stated that his investigation could lead to “a derivative lawsuit being filed on behalf of the shareholders of the Florida pension fund” to impose penalties against Bud Light for bringing a transgender influencers a custom beer can.
Since most Americans are not corporate attorneys, the average person might not immediately smell the bull in DeSantis screams. At last, Governor DeSantis graduated from Harvard Law and knew enough to use the words “trust” and “derivative”. Thankfully, corporate law has largely solved the problem of litigation and destruction of shareholder value like Governor DeSantis.
Any large, publicly traded corporation will have many shareholders with varying views. Some of them, such as Governor DeSantis, will be armchair people eager to attack corporate leaders for making decisions that are different from what they would have otherwise. If shareholders could sue every unprofitable business decision, large corporations would not be able to operate. Business leaders will become timid and afraid to take business risks for fear of some shareholders suing them.
To solve this problem, company law limits the ability of shareholders to litigate the company’s business decisions. The right to sue for damage to the company usually rests with the company, not the shareholders. A company’s board of directors decides how to manage the company’s affairs—including whether to file a lawsuit.
“For perspective, if Florida somehow wins or settles the lawsuit for $50 million, which won’t happen, Florida’s pension fund will recover about $15K.“
A shareholder derivative lawsuit is an exception to this general rule. These lawsuits allow shareholders to assert claims that the current board of directors should not manage on its own. Usually, shareholder derivatives lawsuits involve claims against directors for somehow violating their obligations to the company. For example, a shareholder derivative lawsuit would be appropriate if a board of directors stole money from the company. Since they are incapable of suing themselves, the courts can allow shareholders to bring these claims against the directors on behalf of the company to recover the stolen funds.
American corporate law generally protects directors from speculation about their business decisions through the rule of business judgment. Although countries apply it in different ways, it usually means The court will abstain from voting from examining the business decisions of a company and assume that its officers or directors acted in good faith unless there is some evidence that the board of directors has had some disabling conflict in making the questionable decision.
Governor DeSantis’ proposed lawsuit against AB InBev, Bud Light’s parent company, seems utterly frivolous. It could subject Florida’s pension fund to sanctions and fines for bringing baseless lawsuits.
At the outset, a plaintiff filing a shareholder derivatives lawsuit must name several defendants. Here, it’s probably AB InBev’s board of directors. There is no evidence that AB InBev’s board approves every marketing decision for every brand in the group’s vast portfolio. For the claim to be effective, Florida would have to argue that AB InBev’s board should create some sort of policy to ensure that brand managers discriminate against transgender people when making marketing decisions.
If AB InBev introduced this type of policy, it could create its own liability for discrimination based on gender identity.
But the case is also silent.
Functionally, Florida cannot bring a shareholder derivative action “on behalf of the shareholders of the Florida pension fund” alone. In the very unlikely event that Florida actually secures any recovery, it will be divided among all shareholders as it will settle the claim that belongs to the company. According to recent news reports, the Florida pension fund own about 682,000 out of a total of about 2,019,241,973 AB InBev shared.
This means the Florida pension will receive around 0.03 per cent of any withdrawals. For perspective, if Florida somehow wins or settles the lawsuit for $50 million, which won’t happen, Florida’s pension fund will recover about $15K.
But there are many more reasons why this lawsuit is worthless. AB InBev is a Belgian corporation. This means that Belgian law governs shareholder disputes. Although I am not an expert in Belgian corporate law, I understand that a different process exists to initiate shareholder derivative claims under Belgian law. Belgian law even imposes costs and damages on shareholders for filing a frivolous derivatives lawsuit.
Functionally, this means that Florida’s highly unlikely odds of favoring this type of litigation are about 0.03 percent of any recovery. Its downside can be millions of dollars in court costs, fees, and penalties for filing frivolous lawsuits.
If DeSantis files this derivative suit, Bud Light’s parent company will open a box for him.
