Diversity, equity, and inclusion efforts remain one of the most prominent topics of discussion within corporate leadership. Unfortunately, the views and actions connected to these efforts continues to waver. After the murder of George Floyd and the rise of the Black Lives Matter movement, many corporations made bold commitments to anti-racism initiatives and other equity and inclusion programs. In early 2025, we’ve witnessed much of that momentum swing in the opposite direction.
Despite corporate pledges made in 2020, women and people of color remain grossly underrepresented in corporate leadership. Only 10 percent of Fortune 500 CEOs are women, and just around 4 percent are Black or Hispanic. Men, however, constitute more than half of board members at public corporations. For women and minorities who do break through to positions of leadership, the so-called “glass cliff” leaves them potentially set to fail. And now, legal and political backlash is making inclusive hiring and promotion even harder to achieve.
In a new article, however, I contend that supporting equity and inclusion is more than just the right thing for corporations to do: They have a legal obligation to do it under the doctrine of corporate fiduciary duty.
Recent government action – including presidential threats and mandates and the Supreme Court’s decisions in Students for Fair Admissions, Inc. v. President & Fellows of Harvard College and SFFA v. University of North Carolina– have created a ripple effect of anti-diversity, equity, and inclusion legislation and litigation. Corporations are accordingly being forced to rethink or retreat from their social justice-oriented commitments and investments. Each of these challenges places corporate leaders in an extremely difficult position: Many want to support diversity, but doing so puts them at grave risk of retaliation.
But over the last 30 years, we have seen significant progress through internal corporate policies, public-private partnerships, and activist interventions. The judiciary, particularly in Delaware, has already issued opinions that create obligations for corporate officers and directors toward their more vulnerable employees and affected stakeholder groups and to promote inclusion and belonging.
The Delaware Court of Chancery recent decision, In re McDonald’s Corporation Stockholder Derivative Litigation, provides new precedent for seeing corporate social responsibility as a fiduciary duty. The case held that corporate officers and directors shall be held liable for wrongful acts of sexual harassment that they knew or should have known about. While the decision does not explicitly state that social equity initiatives are a duty, the court clearly indicates that maintaining systems to ensure a safe workplace is critical for the corporation. To further the expansion of corporate fiduciary duties, the court notes that, although “an officer’s duty to address and report upward about red flags . . . applies within the officer’s area, . . . particularly egregious red flag[s] might require the officer to say something even if it fell outside the officer’s domain.”[1] I argue that the court’s mandate for corporations to maintain systems to ensure a safe workplace for women and protection against sexual harassment is a form of women’s rights activism. While the court ultimately dismissed the derivative claims against the corporation, the decision demonstrates that corporate fiduciary duties are expanding to include obligations to women and minority stakeholders.
The doctrine of fiduciary duty requires corporate directors and officers to act in the best interests of the corporation. For decades, this was interpreted narrowly to mean simply maximizing shareholder value. Increasingly, though, fiduciary duty is being interpreted in light of broader corporate responsibilities, including obligations to employees and vulnerable stakeholder groups.
This is a significant shift. It suggests that corporate officers and boards can no longer ignore systemic discrimination or look away from glaring signs of a hostile work environment. Protecting employees, especially those from marginalized groups, is increasingly part of the job description. Fiduciary duty, in other words, may be our most powerful and underutilized tool for advancing equity in the workplace.
In light of shareholder derivative suits alleging that boards of directors breached fiduciary duties in their “old boys club” culture, there is already an indication that the public wants to strengthen women’s rights, and especially gender equity, to be legally included as a factor informing corporate leaders’ decisions. Many corporate leaders already think critically about women’s rights. However, many still stay silent in the face of contrary views. Integrating advancement of women’s rights and gender equality into the concept of fiduciary duty will provide corporate leadership with the protection warranted to create and monitor systems of inclusion and equity.
Corporate leaders play a critical role in how society operates. The corporate fiduciary duty must be legally reexamined and interpreted to include duties not only to the corporation and its shareholders but also to affected stakeholders. Corporations can no longer be focused only on profits. They must also pay attention to the long-term safety, health, and wellbeing of their stakeholders. This means, for example, fostering workplaces where employees can succeed and advance, no matter their race, gender, or background. It’s not just good business. If we look closely at the language within recent judicial opinions, it’s also the law.
ENDNOTE
[1] In re McDonald’s Corp. S’holder Derivative Litig., 289 A.3d 343, 350 (Del. Ch. 2023). It is important to note the court’s language highlighting critical issues: “In September 2019, the Board received an update on the Company’s Enterprise Risk Management (‘ERM’). The presentation identified a ‘Respectful Workplace’ as a ‘New Risk Theme’ at the ‘Top Tier 2’ level. Under the Company’s risk management system, a ‘Tier 1’ risk is (i) ‘[c]ritical to McDonald’s mission and values,’ (ii) ‘[a]ppropriate for ERM Committee discussion,’ and (iii) ‘[m]ay need further discussion around risk appetite.’ A Tier 2 risk is one that has the ‘[p]otential for sustained, negative impact to brand, long term financial grown, or strategy position.’ Id. The Top Tier 2 risks are [m]ore likely to become Tier 1 risks given the circumstances.”
This post comes to us from Geeta Kohli, an associate professor at Widener University Delaware Law School and founding director of the Narrative Justice Project. It is based on her recent article, “Expanding Corporate Fiduciary Duty,” forthcoming in the Michigan State Law Review and available here.