Is the Quest for Corporate Responsibility a Wild Goose Chase? The Story of Lovenheim v. Iroquois Brands, Ltd.

Abstract:     
Lovenheim v. Iroquois Brands, Ltd. is not only a standard teaching case in corporate law courses, it is routinely cited by the Securities and Exchange Commission (SEC) in response to corporations seeking to exclude shareholder proposals from proxy materials on the ground that the proposals are not significantly related to the corporations’ businesses. Despite the case’s prominence, its story has not been told in detail. That is a shame because the details of the case are as surprising as its outcome must have been when the court granted Peter Lovenheim the injunction he sought, forcing Iroquois Brands to include in its proxy materials Lovenheim’s proposal calling for an investigation into whether Iroquois’ French supplier of pâté de foie gras force-fed the geese whose livers they later harvested.

This Article explores the law of shareholder proposals and the reasons why the SEC and the courts permit proposals relating to social or ethical issues (social proposals) so long as those issues relate to the corporation’s business. After a history of the relevant SEC regulations and their fates in the courts, the Article presents the complete narrative of the Lovenheim case, providing details that are not captured in the decision or in the limited secondary literature relating to the case. Finally, the Article explores the legal landscape in the aftermath of Lovenheim. It explains why the case has remained good law in the 25 years since the case was decided and why corporations are not motivated to pressure the SEC to limit shareholders’ rights to bring social proposals.

Keywords: Shareholder Proposals, SEC, Law Stories

JEL Classifications: K22

Working Paper Series