A board is bound by its fiduciary duties to act in the best interest of the corporation. When confronted with shareholder proposals, these duties require the board to consider whether accepting or rejecting the proposal preserves the company’s welfare. If rejecting a proposal better serves corporate interests, this may be justified as fulfilling their fiduciary responsibilities.
For example: A shareholder proposal suggesting that the company invest heavily in speculative assets would obligate the board to assess potential risks. If deemed excessively risky, the board has the fiduciary authority to veto this proposal to protect the company’s and shareholders’ financial interests.