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Business Associations Keyed to Diamond, 6th Ed.
A.P. Smith Manufacturing Co. v. Barlow
Citation:
98 A.2d 581 (1953)Facts
A.P. Smith Manufacturing Company was incorporated in 1896 and engaged in manufacturing valves, fire hydrants, and special equipment for water and gas industries. The company had approximately 300 employees with its plant located in East Orange and Bloomfield, New Jersey. Over the years, the company had regularly contributed to the local community chest and occasionally to educational institutions. On July 24, 1951, the board of directors adopted a resolution authorizing a $1,500 contribution to Princeton University’s Annual Giving campaign. When stockholders questioned this action, the corporation initiated a declaratory judgment action. At trial, the company’s president testified that he considered the contribution a sound investment that created goodwill and a favorable business environment. Corporate executives from other companies testified about the importance of corporate social responsibility and the vital role of private educational institutions in maintaining the free enterprise system. The objecting stockholders acknowledged the need for such contributions and the existence of state legislation supporting them, but contended the corporation lacked authority to make the donation.
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