When a company’s management decides to take a partisan position publicly on a political issue, especially one that is contentious, decreased revenue, whether from potential or actual consumers individually who disagree with the company’s position, or from an organized boycott from groups that stand against the position. Anger may be a stronger motivator than ideological agreement, in which case any increase in purchases would be less than the lost revenue. This asymmetry itself is interesting from the standpoint of human nature, and strongly suggests that CEO’s steer their respective companies, which managements operate on behalf of the stockholders anyway, away from taking controversial positions on social or political issues that do not directly and significantly pertain to the bottom-line (i.e., profitability) in the short- or medium-term. In short, wading into societal issues is, generally speaking, not good for business. What then about a company like the ice-cream manufacturer, Ben & Jerry’s, which from its inception had social/political activism as a salient part of the company’s mission?
Both the initial two owners and all subsequent owners, which
includes Unilever, which bought the company in 2000, could not have become
owners with the understanding that they were buying (into) an apolitical
company, so the fiduciary duty of management was not breached. That Unilever
fired Ben & Jerry’s CEO, Dave Stever, in 2025 because he had continued the
subsidiary’s very public political activism presumably because it included
criticism of U.S. President Trump is, let us say, complicated. I contend that
the firing constitutes a breach of contract even though that contract
contradicts the principle of corporate governance in part but not enough to
justify allowing the firing to stand legally.
On March 18, 2025, the
management of Ben & Jerry’s accused the subsidiary’s parent-company of
violating the ice-cream-maker’s “independence on social policy issues.”[1]
It is precisely because a parent-company has the legal right to control the
management of a subsidiary.
Unilever had informed the
management of Ben & Jerry’s on March 3rd that the latter’s CEO
was being removed “without consulting directors because of his commitment to
the ice-cream maker’s social mission and brand integrity, not because of
concerns about his job performance.”[2]
Unilever’s managers had “repeatedly warned personnel” at Ben & Jerry’s “not
to defy” that management’s “efforts to ‘silence the social mission’” of the
subsidiary.[3]
Unilever’s management blocked the management of Ben & Jerry’s from honoring
of Black History Month and opposing the detention of Mahmoud Khalil, “a U.S.
permanent resident” who had been “active in pro-Palestinian demonstrations at
Columbia University.”[4]
It was not as if the subsidiary were supporting a “KKK (i.e., racist) month”
and gang activity coming across the border from Mexico and hitting streets in
the U.S.; nevertheless, the positions that Ben & Jerry’s management wanted
to take were controversial in nature, though it is not clear that either
position would have lost the subsidiary much revenue.
The issue, I submit, comes
down to corporate governance. Ordinarily, when a company buys another, the
former gets to control the latter. It is not like a federal system wherein two
governing bodies have at least some governmental sovereignty over the same territory;
rather, corporate governance is top-down. The question is whether, in buying
Ben & Jerry’s, Unilever’s agreeing to recognize and go through an
independent board tasked with safeguarding the political and social activism
that were so much a part of the ice-cream brand was valid. In refusing to go
through that board and in accusing the management of Ben & Jerry’s as defying
the Unilever management, the latter was taking the position that as the
owner of the subsidiary, Unilever could unilaterally cancel the agreement.
Prime facie, to sign off on a
clause in a legal contract and while presuming the legal right to unilaterally
invalidate said clause without notifying the counterparty of the escape clause
before the signing is odious and unethical (the technical term being sneaky).
The practice could be considered a form of lying because the standard
understanding of a legal contract is that all parties signing it accept that
they are bound to it and thus cannot legally violate it. Kant reasoned that promise-breaking
is unethical because if such a policy were universalized, making a promise (or
an agreement) would not make sense because no one with any sense would sign a
written contract. The logical contraction itself offends reason and is thus
unethical because it is by the use of reason that we assign value to things.
Another ethical issue is
whether it is fair that Unilever fired Ben & Jerry’s CEO even though plans
were in place to spin off the subsidiary later that year. In February, 2025,
the subsidiary’s management had “accused Unilever of unilaterally banning [the
subsidiary’s management] from publicly criticizing [U.S. President] Trump,
ostensibly because of the ‘new dynamic.”[5]
Given the spin-off plans, this could very well have been the motive in firing
the CEO because even a few months more of political speech could be dire for
Unilever financially, given the president’s penchant for payback. Using
corporate governance to stifle political dissent is, however, questionable
ethically as well as from the standpoint of democracy. The ethical issue would
be exacerbated were Unilever’s board-members or its CEO supporters of President
Trump. In terms of democracy, an elected president’s de facto control of
companies with respect to wiping out political dissent is obviously problematic
because of the importance and right of free-speech in maintaining a republic.
Of course, Hitler’s political use of companies to locate political dissent and
even to find Jews didn’t face any such obstacles.
As important as ethics and
political freedom are, the core issue in this legal case pertains to corporate
governance itself. Specifically, do property rights, such as a parent company
has in being able to control any of its subsidiary companies, trump even a
written contract by which a parent company has agreed that subsidiary’s
management can be protected from certain exercises of control by the parent
company’s management or board? This is the pertinent question in this legal
case.
Noting that a person putting
one’s labor (or money, which represents labor in part) into something renders
it legitimately one’s own property, John Locke saw property rights as existing
in the state of nature, whereas Thomas Hobbes did not; in the contentious
seventeenth-century Europe, he advocated that a political sovereign be given a
monopoly on political (and religious) power in part to protect the property of
people so they would not kill each other over it (though the sovereign could of
course take over the property without providing a justification). In the
antebellum southern States in the USA wherein slaves were considered property,
those slaves had no rights against their respective owners. It is ironic that a
case of humans-as-property illustrates the epitome of property rights, and yet
such rights in themselves, at least in a society, have a legitimate basis. My
point is that while we may not like where the doctrine of property rights can
take us, modern corporate governance is on a sound footing philosophically.
Unilever’s breach of contract
may, however, run aground because a system of property rights is for practical
purposes based in a legal framework, wherein a breach of contract is not legal
even though particular circumstances may admittedly justify it ethically and
even legally. The question of whether Ben & Jerry’s CEO could legally
“defy” the board or management of Unilever because officials representing the
latter signed a legal contract mandating the use of the independent board
centers on whether that clause can be considered to be legally valid and thus
binding even though it “defies” the doctrine of property rights upon which
corporate government itself rests.
I contend that the clause is
legally enforceable. It is not as if that clause were in “boiler-plate”
small-print that the lawyers at Unilever missed. It is not as if the clause
contains an escape sub-clause for Unilever, for Ben & Jerry’s management
(and lawyers) would have flagged it as undercutting the very point in having
the clause in a legal contract. Moreover, the willful unilateral decision by a
party to a contract that it no longer binding is offensive to law itself, which
is an important foundation for a free society, l’etat est moi is a
different story. In fact, it is as if the board or management of Unilever were
saying, we are above the law, or we are the law. Either premise
guts the basis of a legal system, and thus of corporate governance too. Such a
governance system in the private sector is based on a legal system even more
fundamentally than on property rights because even such rights are premised on
a legal system (even though Locke disagreed). Regardless of what holds in the
state of nature, the rights of property in a society are granted by law, which
requires the existence of a legal system unless law is the will of a political
sovereign. This is why it is so important that the President of the United
States recognize the constitutional validity of judicial decisions bearing on a
president’s will, for otherwise that will could easily become law and no legal
system would be needed; the republic would collapse into dictatorship.
That a republic, including
federal republics wherein smaller republics also exist—the E.U. and U.S. being notable
examples—can (and have) become autocracies demonstrates just how tenuous
democracy can be. Property rights, too, may be tenuous, especially in
autocracies even though eminent domain exists in republics. To be sure, the
lack of legal restraint on a regime of dictatorship, for the state’s will is
the law, means that property owners are not typically monetarily
compensated for the loss of their respective properties taken by the state. The
legally contracted legitimacy of the independent board protecting Ben &
Jerry’s social-activist-brand intangible asset is in relative terms not much of
an affront to property rights as instantiated in corporate governance.
I have argued that Unilever’s representatives signed the contract of the merger-agreement means that the independent board is not even not much of an affront. In effect, Unilever’s property rights regarding Ben & Jerry’s explicitly excluded the right to ignore the independent board. As a principle to be derived from this case, it can be maintained that corporate governance does not necessitate or require an absolutist doctrine of property rights. The very existence of the state, whether democratic or autocratic, means that absolute property-rights do not and cannot exist. Therefore, a purchaser of an asset agreeing by legal contract to restrict one’s rights with respect to the use of the asset is legally valid and thus should not be vitiated by later appeals to the doctrine of property rights. In renting house, the house’s owner typically agrees in the lease to restrictions on entering the house. The state may mandate this restriction to protect renters even thought their use of a rented property is not ownership. That is, use-rights can trump property-rights in certain respects short of the right to assume ownership of the property, and the existence of such restrictions on property rights does not destroy property rights as a prominent part of a legal system.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
