In his article, Making It Easier for Directors to “Do the Right Thing?” 4 Harv. Bus. L. Rev. 235, 237–39 (2014), Delaware Supreme Court Chief Justice Leo Strine wrote:

[E]ven if one accepts that those who manage public corporations may, outside of the corporate sales process, treat the best interests of other corporate constituencies as an end equal to the best interests of stockholders, and believes that stockholders should not be afforded additional influence over those managers, those premises do very little to actually change the managers’ incentives in a way that would encourage them to consider the interests of anyone other than stockholders. . . . even if corporate law supposedly grants directors the authority to give other constituencies equal consideration to stockholders outside of the sale context, it employs an unusual accountability structure to enable directors to act as neutral balancers of the diverse, and not always complementary, interests affected by corporate conduct. In that accountability structure, owners of equity securities are the only constituency given any rights. Stockholders get to elect directors. Stockholders get to vote on mergers and substantial asset sales. Stockholders get to inspect the books and records. Stockholders get the right to sue. No other constituency is given any of these rights. (emphasis added, citations omitted)

There has been a lot of anger and shock in the reporting over the price increases by EpiPen-maker Mylan. See, e.g., here, here, here, and here, but I think Chief Justice Strine’s observation about the general accountability structure of corporate law is at least a partial explanation. (To be sure, there also appears to be an executive compensation story, though the executive compensation structure may be driven by the shareholder-centric accountability structure. That said, Mylan appears to be a Netherlands-incorporate company, and I know very little about the structure of its corporate law.)

The price for an EpiPen has increased a staggering amount since 2007 when pharmaceutical company Mylan acquired the product – wholesaling for $100 in 2007; $103.50 in 2009; $264.50 in 2013; $461 in 2015; $608.61 in 2016.

The general tone of the reporting in the mainstream media is one of outrage.

But isn’t this to be expected? Granted, the business judgment rule provides a lot of leeway, and I would not argue that Mylan was “forced” to hike prices, even if Mylan were incorporated in Delaware. But if we give shareholders virtually all of the significant corporate governance tools, isn’t it obvious that directors and officers will often seek shareholder interests even when it is harmful to communities? The bigger story here may be that certain norms and the fear of negative press have been able to keep plenty of other companies from following suit.

My article Adopting Stakeholder Advisory Boards, due out next semester in the American Business Law Journal, suggests giving some of the corporate governance accountability tools (such as certain voting rights) to a stakeholder advisory board made up of stakeholder representatives. The article argues that adoption of stakeholder advisory boards should be mandatory for large social enterprises (because they both chose a social entity form and have the resources) and should be voluntarily adopted by other serious socially-conscious companies. An accountability change of this sort might bring public expectations and the corporate law accountability structure into line.

Separately, are there certain industries – like the health care industry – that we want to be less profit-focused than others? For those industries, perhaps requiring (or making attractive through regulations/taxes) the choice of a social enterprise form (like benefit corporation) may make some sense. However, as noted in my article, the benefit corporation accountability structure is quite shareholder-centric, similar to the structure for traditional corporations. Granted, socially-motivated shareholders may exert some pressure on benefit corporations and the benefit corporation law may give them a somewhat better chance to do so, but if we want real change, I think the corporate accountability structure needs to be more completely redesigned.

Personal Note: When I was a child, my mom carried an EpiPen for me, following an incident involving plastic armor, a tennis racket, and whacking a big bee nest.