Union Pacific Railroad Co.

v.

Trustees, Inc.

8 Utah 2d 101, 329 P.2d 398 (1958)

[Union Pacific Railroad Company sought a declaratory jugement that it could lawfully contribute $5,000 to a

non-profit organization for charitable, scientific, religious, or educational purposes. The lower court had held that it could not. Neither the company's charter nor the applicable state corporate statute expressly gave the corporation the power to make the contribution.]

HENRIOD, JUSTICE.

Directors of the plaintiff testified with singular unanimity that such new concept conceived in a shifting socio-economic atmosphere was born of new corporate business policy. It seems to be nurtured by legislative, corporate and judicial thinking. A reasonable percentage of corporate income, they urge, should be earmarked for worthy causes, as a necessary and proper item of business expense, just as funds are tagged for advertising,public relations and the like.

Mr. E. Roland. Harriman, Chairman of plaintiff's Board, said "I think it is good business to do so; in the long run beneficial to our stockholders . . . I think the public has come to expect that we will support worthwhile local and national causes, and, in effect, we agree with this viewpoint." Mr. John S. Sinclair, director, said: "We have come to expect corporations to behave in the field of social consciousness as individuals would behave, that is, with a prudent eye to its firiancial capacity and selectivity as to the objects of its generosity . . .Corporate donations create good will in the community."

It strikes us as being rather inconceivable, in what seems to be a visible, substantial national trend, that men heretofore known for their administrative and executive experience and ability, suddenly and deliberately would espouse a program on behalf of a corporation in which they are interested, and to whose shareholders they are amenable and accountable, if they were not confident that their company presently and directly, or within the foreseeable future, would receive a quid pro quo as the resultant of good will engendered by contributions.

The iconoclast may discount the suggestion that corporations have been endowed with a new kind of altruistic conscience, as being mythical and' hardly a reason to support corporate action based on implied power, but aside from any desire to assist others without hope of reward, when a contribution to a laudable cause has been made, a real, important and serious question is posed: Why was the contribution made? We believe that if it were made with the studied and not unreasonable conviction that it would benefit the corporation, it should be the type of thing that should rest in the sound discretion of management

and within the ambit of a legitimate exercise of implied authority in the ordinary course of the company's business. It is not too much unlike the sponsoring of a baseball team, subsidizing promising scholars with a view toward possibly employing them later on, giving to the local community chest, paying the salary of a public relations expert, sponsoring a concert or télévision program, or conducting a newspaper or radio advertising program. Such actions seldom produce any immediate and direct corporate.benefits, but all involve use of corporate funds that otherwise could have gone to shareholders had such funds remained unspent. Few would venture that the company could not do all these things without express, specific authority in the charter. We think that a power once denied today may be implied under changed conditions and philosophies, and that in the light of present day industrial and business exigencies, common sense dictates that included in the implied powers of a corporation, an authority should be numbered that allows contributions of reasonable amounts to selected charitable, scientific, religious or educational institutions, if they appear reasonably designed to assure a present or foreseeable future benefit to the corporation; that management's decisions in such matters should not be rendered impotent unless arbitrary and unreasonably indefensible, or unless countermanded or eliminated by action of the shareholders at a propre meeting.

The contribution in the instant case appears to fall within implied corporate powers under such principles.

[Reversed]