Duty and Diversity

90 Pages Posted: 19 Feb 2021 Last revised: 31 Mar 2021

See all articles by Chris Brummer

Chris Brummer

Georgetown University Law Center; The Institute of International Economic Law (IIEL); Atlantic Council

Leo Strine

University of Pennsylvania Carey Law School; Wachtell, Lipton, Rosen & Katz; Columbia Law School - Ira M. Millstein Center for Global Markets and Corporate Ownership

Date Written: February 18, 2021


In the wake of the brutal deaths of George Floyd and Breonna Taylor, a slew of reforms from Wall Street to the West Coast have been introduced, all aimed at increasing Diversity, Equity, and Inclusion (“DEI”) in corporations. Yet the reforms face difficulties ranging from possible constitutional challenges to critical limitations in their scale, scope and degree of legal obligation and practical effects.

In this Article, we provide an old answer to the new questions facing DEI policy, and offer the first close examination of how corporate law duties impel and facilitate corporate attention to diversity. Specifically, we show that corporate fiduciaries are bound by their duties of loyalty to take affirmative steps to make sure that corporations comply with important civil rights and anti-discrimination laws and norms designed to ensure fair access to economic opportunity. We also show how corporate law principles like the business judgment rule do not just authorize, but indeed encourage American corporations to take effective action to help reduce racial and gender inequality, and increase inclusion, tolerance and diversity given the rational basis that exists connecting good DEI practices corporate reputation and sustainable firm value. By both incorporating requirements to comply with key anti-discrimination laws mandatorily, and enabling corporate DEI policies that go well beyond the legal minimum, corporate law offers critical tools with which corporations may address DEI goals that other reforms do not—and that can embed a commitment to diversity, equity, and inclusion in all aspects of corporate interactions with employees, customers, communities, and society generally. The question therefore is not whether corporate leaders can take effective action to help reduce racial and gender inequality—but will they?

Keywords: corporate law, purpose & governance; racial & gender equality; demographic dilemma; inequality; sustainable firm profitability; reputation; diversity, equity, inclusion; DEI initiatives; fiduciary duty principles covering directors & officers; duty of loyalty; Caremark

Suggested Citation

Brummer, Christopher J. and Strine, Leo, Duty and Diversity (February 18, 2021). U of Penn, Inst for Law & Econ Research Paper No. 21-08, Columbia Law and Economics Working Paper No. 642, Vanderbilt Law Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3788159 or http://dx.doi.org/10.2139/ssrn.3788159

Christopher J. Brummer (Contact Author)

Georgetown University Law Center ( email )

Washington, DC 20057
United States

HOME PAGE: http://www.law.georgetown.edu/faculty/brummer-chris.cfm

The Institute of International Economic Law (IIEL) ( email )

Georgetown University Law Center
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Washington, DC 20001
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HOME PAGE: http://iielaw.org/member/chris-brummer-2/

Atlantic Council ( email )

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HOME PAGE: http://chrisbrummer.com

Leo Strine

University of Pennsylvania Carey Law School ( email )

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United States

Wachtell, Lipton, Rosen & Katz ( email )

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United States
212-403-1178 (Phone)

Columbia Law School - Ira M. Millstein Center for Global Markets and Corporate Ownership ( email )

435 West 116th Street
New York, 10027
United States

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