In a posting on the Business Law Prof Blog, Professor Stefan J. Padfield recently highlighted a complaint filed by America First Legal Foundation with the U.S. Equal Employment Opportunity Commission.  The complaint alleges that McDonald's Corporation McDonald’s publicly admits to intentionally and systematically violating federal laws prohibiting discrimination in employment.  The complaint supports this claim by citing the corporation's global DEI (diversity, equity and inclusion) report.  

In general, corporate law does not allow corporations to violate laws.  See In re Massey Energy Company Derivative and Class Action, C.A. No. 5430-VCS (Del. Ch. 2011) ("Delaware law does not charter law breakers. Delaware law allows corporations to pursue diverse means to make a profit, subject to a critical statutory floor, which is the requirement that Delaware corporations only pursue 'lawful business' by 'lawful acts.'").  Thus, directors must not knowingly countenance corporate lawbreaking and face potential personal liability when they fail to exercise appropriate oversight.   In Delaware, this oversight obligation is now typically enforced by so-called Caremark derivative claims.  "Caremark" refers to Chancellor Allen's decision in In re Caremark Int'l. Deriv. Litig., 698 A.2d 959 (1996) in which he found that directors could be liable for failures of oversight. 

The complaint against McDonalds alleges that "there is ample reason to believe that the company has knowingly and intentionally violated federal law and will continue to do so."  Thus, it raises the specter of potential Caremark liability on the part of the directors. Corporations undoubtedly publish DEI reports to showcase their accomplishments, but what if those accomplishments are illegal?

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