If a board of directors authorizes corporate employees to break traffic regulations, has the board breached its fiduciary duties?

Thinking about Chancery Daily's Post

Here’s a problem from my casebook Advanced Corporation Law: Gotham City is a major metropolis on the East Coast of the United States. Its city street layout was designed in the late 1800s long before cars became commonplace. As a result, the streets are quite narrow. In addition, large sections of the city were built prior to the Second World War, when cars were rare. As a result, many buildings—in both residential and business sections of the city—lack off-street parking and loading docks. In turn, the lack of off-street parking means that the limited amount of available on-street parking is typically fully occupied. The parking issues significantly complicate the work of parcel delivery services, which is becoming even worse as internet-based home delivery services have multiplied to include products such as meals, groceries, and a host of other products. Drivers are often unable to find parking at or near the building to which they must make a delivery. In such circumstances, drivers routinely double park while dashing inside a building to make a delivery.

To combat the increasing wave of traffic congestion, the Gotham City Council recently passed a new law significantly increasing the fine for double parking.

You are General Counsel and Chief Legal Officer of Federal Package Services, a leading parcel delivery service corporation. The Chairman of the Board has called a meeting of the board of directors to consider a response to the new law. The Chief Logistics Officer reports to the board that drivers complying with the new law are expending significant amounts of time circling blocks looking for legal parking spaces and, if they can be found, are parking significantly further away from delivery locations. She tells the board that drivers are making 50% fewer deliveries per day, while fuel and related costs are up by 40%. If the company continues to comply with new law, it will need to hire a significant number of new drivers and add a substantial number of new delivery vehicles, since the search for parking means each truck will make fewer deliveries. The corporation’s Head of Human resources reports that driver morale is extremely low. The board member who chairs the board’s Committee on Sustainability and Social Responsibility Initiatives chimes in with an observation that compliance with the law has increased the corporation’s global carbon footprint by 5 percent.

The corporation’s Chief Financial Officer reports calculations that the new drivers, additional vehicles, and lost time necessary for compliance with the law will cost the company $30 million per year (out of revenues of $1.5 billion and profits of $115 million), not including social costs of increased carbon output and so on. If the corporation orders its drivers to disobey the law, double park as needed, and have the company pay any parking tickets, the company not incur any of those expenses but will pay about $4 million per year in traffic fines, resulting in a net savings of $26 million.

The Chairman of the Board asks you to advise the board as to whether adopting a corporate policy instructing drivers to violate the parking ordinance when and as necessary would expose the board of directors to any risk of personal liability. What advice to you give the board?