EXPANDING CORPORATE FIDUCIARY DUTY

Abstract

Equity and representation are difficult and risky topics at the moment. Nevertheless, given the social, economic, and political power corporations hold, a wave of corporate directors and officers continue to view diversity, equity, and inclusion as a moral and ethical requirement. This Article argues that anti-hate rhetoric can also be situated as a legal obligation under the doctrine of corporate fiduciary duty. As inclusive leadership efforts fluctuate in both public perception, systematic infrastructure, and most recently, political prohibitions, some corporations are creating private institutional structures, and advancing inclusive leadership connected goals through these private institutional structures and external philanthropic outreach. This Article proposes that the doctrine of corporate fiduciary duty can, should, and in fact, already is expanding to encompass social responsibility initiatives  within corporate officers’ and directors’ duties of care and loyalty to the corporation and its shareholders.

The Delaware Court of Chancery recent decision, In re McDonald’s Corporation Stockholder Derivative Litigation, provides new precedent for gendering corporate social responsibility through the lens of fiduciary duty. The case held corporate officers and directors shall be held liable for wrongful acts of sexual harassment that they should have had implied or inferred knowledge of. While the Court ultimately dismissed the derivative claims, the decision demonstrates that corporate fiduciary duties are expanding to include obligations to stakeholders such as women. In analyzing this case and the broader evolution of the corporate fiduciary duty doctrine, this Article applies the case study on women’s rights to demonstrate a legally cognizable method of incorporating social responsibility initiatives in the corporate compliance context: corporate fiduciary duty.

Debate regarding shareholder capitalism and ESG will further show why expansion of corporate fiduciary duty is not only necessary, it is desired and already happening in real time. This Article argues that this expansion of the fiduciary duty doctrine is a positive step towards social change. To show how expansion is possible, I examine and apply the policy rationales and holdings in recent Delaware court opinions to equity concerns. This Article invites comment and collaboration between corporate leaders, the judiciary, and corporate law scholars to address continued expansion of corporate fiduciary obligations in a climate of grave risk for corporate officers and directors.