Green Business: Should We Revoke Corporate Charters for Environmental Violations?

68 Pages Posted: 4 Dec 2009

See all articles by Mitchell F. Crusto

Mitchell F. Crusto

Loyola University New Orleans College of Law

Date Written: 2003


Following the recent corporate abuses in financial reporting and the resulting passage of the Sarbanes-Oxley Act of 2002, it is appropriate to focus attention on the adequacy of corporate governance of environmental behavior, including environmental financial disclosures.

Broadly speaking, this article addresses a pivotal question: Does United States corporate law help or hinder environmental protection? More narrowly, it focuses on a recent critique of corporate law that demands that a corporation should be made to surrender its corporate charter for violating environmental laws. It proposes a corporate code of environmental principles, namely, Corporate Environmental Principles (“CEP”). It concludes that corporations should greatly improve their environmental protection efforts, and that their voluntary adoption of Corporate Environmental Principles or CEP is the right answer.

This is a timely discussion. Recent corporate financial scandals involving Enron, Worldcom, Arthur Andersen, and others have heightened awareness of the need to revisit corporate accountability. The environment, particularly climate change, is still a major global concern. And there is evidence that both government and industry are failing to achieve corporate self-regulation of environmental protection.

One radical proposal – that states revoke a corporation's charter for violation of environmental laws – was recently proposed against a transnational oil company, UNOCAL. This proposal raises an exciting corporate law issue, “Can and/or should states revoke corporate charters for environ-mental violations?” While this proposal seems a bit extreme, an analysis of this issue illuminates how corporate structure promotes or hinders corporate environmental protection.

This article analyzes the interdisciplinary relationship between corporate law and environmental protection. First, it describes and analyzes the benefits and requirements of incorporation. Second, it proposes a model, corporate self-regulatory code, Corporate Environmental Principles (CEP). Third, it makes the case for a voluntary code of corporate environmental principles. Fourth, it describes sources of change in corporate environmental behavior and evaluates how corporations react to change. It also analyzes the interdisciplinary relationship between securities laws and corporate environmental disclo-sures. And lastly, it recommends that the American Law Institute supplement its existing Principles of Corporate Governance with the newly proposed Corporate Environmental Principles.

Finally, the author concludes that it is greatly unlikely that corporate charters would be (or should be) revoked for environmental violations. Yet, as the United States Congress and the President are considering how to hold corporations accountable for their financial reporting, via the Sarbanes-Oxley Act, it is likely that the Securities and Exchange Commission will revisit its policies on corporate environ-mental disclosures. In order to anticipate the government's and society's environmental expectations, it is advisable that corporations voluntarily adopt and implement Corporate Environmental Principles. This would allow corporations to stay ahead of compliance, do right for its other constituents, and achieve competitive business advantage.

Keywords: green business, revoke corporate charters, environmental violations, corporations

Suggested Citation

Crusto, Mitchell F., Green Business: Should We Revoke Corporate Charters for Environmental Violations? (2003). Louisiana Law Review, Vol. 63, No. 176, 2002-2003, Available at SSRN:

Mitchell F. Crusto (Contact Author)

Loyola University New Orleans College of Law ( email )

7214 St. Charles Ave.
Campus Box 901
New Orleans, LA 70118
United States
504-861-5743 (Phone)

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