Last week, AT&T CEO Randall Stephenson called his company’s decision to hire Trump personal lawyer Michael Cohen as a political consultant for hundreds of thousands of dollars “a big mistake.” It might have been more than that. Depending on what AT&T, Cohen, and Trump knew and when they knew it, the deal could have been a crime. But there is at least one situation in which the arrangement might not have been illegal. Indeed, under one view of the nature of the corporation, AT&T might even have had a duty to hire Cohen.

Cohen Cashes In

Cohen has been described as Trump’s personal lawyer and his “fixer.” Now that there is a criminal investigation into Cohen’s business dealings, Trump has sought to minimize their relationship and to disclaim knowledge of much of Cohen’s work. But shortly after the 2016 presidential election, Cohen sought to create the exact opposite impression. In soliciting consulting work from Fortune 500 companies and wealthy individuals, Cohen touted his closeness to Trump as invaluable to all those with a large financial interest in how official administration policy would affect them.

Was that illegal? Possibly. If Cohen was in effect a bag man for Trump, then he, Trump, and the firms and individuals who knowingly paid for Cohen’s “consulting” services may have violated laws forbidding bribery. Perhaps there was a three-way quid pro quo: AT&T paid Cohen as a consultant; Cohen used some portion of the proceeds to pay hush money to Stormy Daniels for Trump’s benefit; and Trump in turn backed off on his efforts to block AT&T’s $85 billion merger deal with Time Warner. Such an arrangement could subject AT&T personnel and Cohen to criminal prosecution and Trump to impeachment, as bribery is one of the two impeachable offenses explicitly mentioned in the Constitution.

To be sure, the fact that the Trump/Sessions Department of Justice (DOJ) has not backed off in its lawsuit seeking to block the AT&T/Time Warner merger suggests that there was no quid pro quo—or at least none that went into effect. Earlier this year, the federal district judge presiding over the DOJ antitrust suit against AT&T and Time Warner rejected the defendants’ motion seeking discovery into whether Trump’s hostility to what he regards as CNN’s unduly negative news coverage of his administration motivated the DOJ lawsuit. Perhaps the revelations of Cohen’s efforts to peddle his close ties to Trump might be the basis for a reconsideration of that decision. In any event, at this point, the existence of a quid pro quo involving Time Warner or any of Cohen’s other consulting clients is speculative.

Meanwhile, some observers have suggested that Cohen might have violated federal law by failing to register as a lobbyist. Whether he was obligated to register depends on the nature of his services and how he allocated his time. It is entirely possible that Cohen’s actions were sleazy but not illegal.

Even if Cohen did not violate the criminal law, he may have violated his ethical duty as an attorney. Seen in the most innocent light, Cohen told AT&T and other consulting clients that, for a hefty fee, he would provide them insight into how another of his clients—Trump—thinks. Yet if Cohen obtained his insights into Trump’s thinking as a result of Trump’s own confidential attorney–client communications with him, then Cohen would have been violating his duty of loyalty to Trump. Notably, that could be true even if Cohen did not disclose to AT&T or any other consulting clients what he and Trump discussed. The duty of loyalty goes beyond keeping client confidences.

Here too, however, we need to know more to reach a definitive conclusion. Was Cohen acting as Trump’s attorney, as Trump suggested in a tweet criticizing the FBI raids directed at Cohen? Or was the relationship something else? Even if Cohen was Trump’s attorney, he could have shared information he learned from Trump if Trump authorized it. But that potential loophole for Cohen would work to Trump’s disadvantage. If Trump authorized Cohen to solicit consulting business based on his connections to Trump, that would be evidence of an illegal bribery scheme.

AT&T’s “Big Mistake”

If AT&T or Novartis, which also paid a large consulting fee to Cohen, had reason to believe that the payment would violate the law, corporate managers and directors would have had a fiduciary duty to their shareholders not to make the payment, even if making it would have resulted in a net pecuniary gain. Interestingly, a leading case establishing that proposition also involved AT&T and a possibly political payment. In Miller v. AT&T, the US Court of Appeals for the Third Circuit read New York corporate law to authorize liability in a shareholder derivative suit against AT&T directors for failure to collect a debt owed by the Democratic National Committee, allegedly in violation of campaign finance regulation.

Suppose, however, that AT&T and Novartis were confident that hiring Cohen as a consultant was legal. If so, did they do anything wrong? Certainly now that the payments have come to light, the firms have taken a public relations hit, but is there more? Was the mistake paying Cohen or merely paying Cohen given the chance that the public would find out?

The answer depends on how one views the obligations of corporate managers and directors. Under one view—most famously expressed by the Michigan Supreme Court in the 1919 case of Dodge v. Ford Motor Co.—“a business corporation is organized and carried on primarily for the profit of the stockholders,” and thus the managers and directors of the corporation may not conduct the business in such a manner as “to benefit mankind at the expense of” shareholders. Read for all it is worth, Dodge would not only permit, but require AT&T, Novartis, and other corporations to pursue opportunities of the sort presented by Cohen if they concluded that paying Cohen was legal and that, all things considered, doing so would maximize corporate profits.

However, Dodge has rarely been read for all it is worth. As the editors of one leading corporate law casebook observe, “Dodge is in all the casebooks for a reason: there are few other opinions that actually enforce shareholder primacy as a rule of law—that is, to predicate liability on its breach.” A shareholder derivative suit claiming that the managers or directors of a corporation failed to take advantage of any particular profit-making opportunity would almost certainly fail, because the so-called business judgment rule affords managers and directors broad discretion to run the corporation. Even the desire to avoid the possibility of adverse publicity would be a sufficient basis to sustain a corporation’s decision to eschew doing business with the likes of Michael Cohen.

If AT&T and Novartis had no legally enforceable obligation to hire Cohen as a consultant, why did they do it? The short answer is that, even though the law permits corporate managers and directors broad discretion to take account of the public interest in their actions, corporate culture and the market create incentives to maximize profits and share prices. Yet it need not be that way.

Last month my colleague Lynn Stout died of cancer at the age of 60. Lynn’s loss is a personal tragedy but also a national one. Her work explained how corporations could be a force for great good but are too often amoral or even “psychopathic,” because far too many market actors accept the myth that maximizing profits must be the sole organizing principle of the corporation. Lynn tirelessly developed an alternative model of the “prosocial” corporation.

The Cohen influence-peddling scandal has been largely covered through the lens of public-sector corruption—a matter of Donald Trump empowering the very sort of swamp creature he disingenuously promised to remove from our political life. It is that kind of scandal, but it is also something else. If Lynn Stout were still alive, she would direct our attention to the rot in corporate culture that leads executives to calculate the cost of doing business with Michael Cohen only in dollars and in public relations risk, neglecting the wider cost to society of legal, no less than illegal, public corruption.