This Model Corporate Code was developed by Attorney Robert Hinkley to expand the duties of corporate managers, directors and trustees to include obligations to workers, communities, and the environment, in addition to the duty to make a profit.

For discussion of this code, see the related article in this library, Robert Hinkley, "28 Words to Redefine Corporate Duties The Proposal for a Code for Corporate Citizenship," Multinational Monitor Vol. 23, No2. 7 & 8 (July/August, 2002).



Preamble. Whereas directors of corporations formed under this [chapter] have heretofore been required by law to manage their companies in the best interests of such companies and their shareholders and

Whereas this requirement has been found to restrict directors from managing companies in a manner that fully respects the public interest and

Whereas the legislature believes that large corporations formed under the laws of [this state] should have due respect for and safeguard the environment, human rights, the public health and safety, the welfare of communities in which such corporations operate and the dignity of employees,

Now therefore, in order to expand the duties of corporate directors to require that the pursuit profit by corporations formed under this [chapter] no longer occurs at the expense of the environment, human rights, the public health or safety, the welfare of communities or the dignity of employees, be it enacted that the following [article] shall be added to the [State] [Business Corporation Act]:

Section 1. Duty to Safeguard the Public Interest. It shall be the responsibility of the directors to manage the corporation in a manner that does not cause damage to the environment, violate human rights, adversely affect the public health or safety, damage the welfare of the communities in which the corporation operates, or violate the dignity of the corporation's employees.

Section 2. Civil Liability for Damage Caused to the Public Interest. In the case that any corporation formed under this [chapter] causes damage to the environment, violates human rights, adversely affects the public health or safety, damages the welfare of the communities in which the corporation operates, or violates the dignity of its employees, any person damaged by such action, may either in law or in equity, in [court of competent jurisdiction], sue either

(a) the corporation or

(b) any person who was a director of the corporation either at

(i) the time the damage occurred or

(ii) the time the board of directors approved the corporate action that led directly to such damage.

Section 3. Exemptions from Liability in Certain Cases. (a) Notwithstanding any other provision of this Article, no director shall be liable as provided therein who shall sustain the burden of proof that

(i) the damage complained of was the direct result of an action approved by the corporation's board of directors that the director had voted against; or

(ii) the damage complained of was the direct result of an action approved by the corporation which approval occurred prior to the director becoming a member of the board.

(b) This article shall not apply to corporations, or the directors thereof, the annual revenues of which are less than $5 million.

Section 4. Amount of Damages. (a) The suit authorized under Section 2 may be to be recover damages as shall represent the greater of (i) the actual damage caused to the plaintiff or (2) three times the savings which accrued to the corporation as the result of failing to safeguard the public interest as required by Section 1.

[Optional provision: (b) The trier of fact may award punitive damages against a defendant for violation of Section 1 if the plaintiff has established by clear and convincing evidence that the defendant knowingly, intentionally or recklessly caused damage to the environment or injury to any person or community protected by Section 1 and an award is necessary to punish the defendant for the conduct or to deter the defendant from similar conduct in like circumstances.]

Section 5. Contribution. Any director against whom a claim is asserted under Section 2 and who is held liable thereon, is entitled to contribution from the other directors who are likewise liable thereon or any other director who, if sued separately, would have been liable to make the same payment.

Section 6. Limitation of Actions. No action shall be maintained to enforce any liability under Section 2 unless brought within two years after the discovery of the damage caused. In no event shall any such action be brought to enforce liability created under Section 2 more than six years after the time of the action of the corporation which created such liability. No action shall be brought to enforce any liability under Section 2 that accrues prior to [the fifteenth anniversary date of enactment].

Section 7. Liability of Controlling Persons. (a) Every person who, by or through stock ownership, agency or otherwise, or who, pursuant to or in connection with an agreement understanding with one or more other persons by or through stock ownership, agency or otherwise, controls any person liable under Section 2, shall also be jointly and severally liable to the same extent as such controlled person to any person whom such controlled person is liable, unless the controlling person had no knowledge of or reasonable grounds to believe in the existence of the facts by reason of which the liability of the controlled person is alleged to exist.

(b) For purposes of this Section 6, the term "control" (including the terms "controls", "controlled" and controlling") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise.

Section 8. Attorney General.

(a) Whenever it shall appear to the Attorney General that any corporation is engaged or about to engage in any acts or practices which constitute or will constitute a violation of the provisions of Section 1, the Attorney General may in his or her discretion bring an action in any [appropriate state court] to enjoin such acts or practices, and upon proper showing a permanent or temporary injunction or restraining order shall be granted without bond.

(b) Whenever it shall appear to the Attorney General that any corporation or person has violated Section 1, the Attorney General may bring an action in any [appropriate state court] and the court shall have jurisdiction to impose, upon a proper showing, a civil penalty upon the person who committed such violation. Any such penalty shall be payable to the State of [appropriate state].

Section 9. Criminal Penalties. Any director who willfully violates Section 1, shall upon conviction be fined not more than $1,000,000 or imprisoned not more than five years, or both. Such monetary penalty shall not reduce the amount of any civil judgement paid under Section 4.

Section 10. Attorneys' Fees. Upon motion, a court may award attorneys' fees to a successful party against one or more defendants in any action which has resulted in the enforcement of this article against a corporation or a director thereof if: (a) a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons, (b) the necessity and financial burden of private enforcement are such to make the award appropriate, and (c) such fees should not in the interest of justice be paid out of recovery, if any.