Sustainability and Corporate Governance

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Social Enterprises

For a long time, a significant potential impediment for sustainability initiatives that required investment of resources in activities that may appear to be unrelated to the traditional focus of U.S. corporations on maximizing profits for the stockholders was the fiduciary duties of the directors of the corporation. For example, when Henry Ford proposed to use surplus profits to hire additional employees to fight unemployment and increase benefits for employees rather than distribute such profits to the stockholders of Ford Motors, the Michigan Supreme Court, writing in 1919, found that Ford’s actions would breach his fiduciary duty of good faith to the corporation.¹ The Court explained:

A business corporation is organized ...