On Friday, June 18, in a live interview on WVUE, Fox 8 news, Law Professor, Mitch Crusto, stated that the President Obama inspired BP Fund is a symbolic, yet illegal victory. “Under US corporate law principles, the BP Board of Directors lack the power to divert corporate funds for non-profit purposes. As a result, expect to see a shareholder group sue the BP Board to prevent the Board from using BP funds to act in a charitable manner. The Board’s creation of the BP Fund is an ultra vires act, beyond the Board’s power.” Professor Crusto explains that under corporate law, BP’s assets ultimately belong to its shareholders, subject to creditor claims. The Board acts as trustees for the shareholders and other stakeholders. As a result, the law constraints the Board from acts that violate the corporate prime directive which is to maximize shareholders’ profits.
“Unfortunately, and while I would personally like to see the BP Fund provide relief to those impacted by the oil spill, those impacted should not take great comfort in the Fund’s creation.” As to the use of the Feinberg firm to administer the Fund, Crusto said that he would have preferred an open bid process that might have allowed a Gulf Coast-based business to compete for and possibly obtain the business opportunity. “While, the Feinberg firm has received mixed reviews for its handling of the September 11 Fund, an open bid process could have resulted in a Gulf Coast firm getting the business. This would certainly help to offset the economic loss due to the oil spill”
Professor Crusto is currently completing a research study on the question of whether the BP Board has the legal right to create the BP Fund. The study is entitled “Charitable Acts: How Corporate Law Limits BP’s Board’s Authority to Create the BP Fund.”