American corporate law tolerates green businesses. Green business decisions that are informed, disinterested, and made in the good-faith best interests of the firm will enjoy deference pursuant to the business judgment rule, whether the decisions maximize shareholder profits or sacrifice them in the name of sustainability. Corporate law generally stops there, however, and neither encourages green business efforts nor particularly discourages them.
States are more or less uniform in this approach, and thus new businesses selecting a state of incorporation have had no green basis for preferring one state’s corporate laws to those of another. Recent efforts in Oregon to green its corporate law signal a change to this status quo. Perhaps these efforts portend a new round of interstate competition for corporate charters, as states like Oregon begin to vie with one another to attract green business charters and their associated revenue.
This Article proceeds as follows. Part I recounts previous bouts of interstate competition for corporate charters and notes the “race-tothe- bottom” and “race-to-the-top” theories that purport to explain their results. Part I then describes the current movement toward green or sustainable business practices, notes the compatibility of these practices with current corporate law, and posits that the trend will trigger a new race among states to attract corporate charters—not to the bottom nor to the top but rather “to the left.” Part II opens with a description of Oregon’s recent efforts to make its corporate law more amenable to green businesses, and then the Article proposes a comprehensive agenda for greening a state’s corporate code. Some of these suggestions take the form of generally applicable provisions consistent with current corporate law and aimed at clarifying its compatibility with green business practices. The remaining suggestions form a set of optional provisions that allow firms wishing to be governed by more stringent, green business standards to elect to do so.
Judd F. Sneirson, Race to the Left: A Legislator’s Guide to Greening a Corporate Code, 88 Or. L. Rev. 491 (2009).