Racial Discrimination and the Relationship Between the Directorial Duty of Care and Corporate Disclosure

Authors

Cheryl L. Wade, St. John's University School of LawFollow

Document Type

Article

Publication Title

University of Pittsburgh Law Review

Publication Date

2002

Volume

63

First Page

389

Abstract

(Excerpt)

Two corporate employers paid settlements of seismic proportions to minority employees alleging race discrimination in recent years. In 1996, Texaco settled a class action alleging race discrimination for $176 million, and in 2000, Coca-Cola settled race discrimination litigation for $192.5 million. The terms of both settlements required the insertion of outside auditors into typically internal and private corporate governance decisions, and the creation of governance processes designed to investigate and monitor compliance with laws prohibiting race discrimination. In this article I conclude that the settlements mandate managerial and directorial conduct that should have been undertaken when the charges of pervasive race discrimination were first made—long before the litigation was filed.

I will analyze the conduct and official responses of corporate executives when facing race discrimination allegations to show that boards and executives breach their fiduciary duty of care owed to shareholders when they fail to investigate and monitor their employees' complaints of racism. The terms of both the Texaco and Coca-Cola settlements ask managers and board members to take the steps they should have taken immediately upon receiving notice of racial discrimination. The settlements mandate conduct that would have satisfied fiduciary obligations.