The Consideration of Sustainability by Corporate Directors
Journal of Environmental Law and Practice, Vol. 26, No.1, 2013
31 Pages Posted: 16 Jun 2014 Last revised: 27 Jun 2014
Date Written: 2013
There has been a long standing assumption that directors are required to consider only the interests of shareholders as part of the best interest of the corporation. My research suggests this assumption does not accord with Canadian law. Corporate directors are required to consider the best interest of the corporation which includes a diverse set of stakeholders. Recent case law suggests that corporate directors have a legal obligation to make decisions as a good corporate citizen. This research tests the legal liability of so-called corporate sustainability pledges and finds they do not create legally binding obligations upon corporate directors. However, directors are shielded from liability when engaging in a standard of conduct aligned with the protocols contained in a sustainability pledge. Therefore, while stakeholders may not be empowered to legally hold corporations to account on sustainability pledges, it remains in the purview of directors to decide whether they will follow these self-imposed guidelines.
Keywords: Sustainability, Corporate Social Responsibility, Corporate Fiduciary Duties, Corporate Law
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