Illegality

It's common to hear that fiduciary duties require corporations to maximize profits, even if doing so would violate the law. That's false. Even the most die hard defenders of profit maximization agree that corporations must abide by "the basic rules of the society, both those embodied in law and those embodied in ethical custom." Milton Friedman, The Social Responsibility of Business Is to Increase Its Profits, NY Times (Sep. 13, 1970).

While courts will not enforce Friedman's "ethical customs," they will enforce violations of the law. Directors and officers that cause a corporation to violate the law may be held personally liable. And these violations cannot be exculpated. DGCL § 102(b)(7) (allowing exculpation for "acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law.").

The theory is that breaking the law is disloyal to the shareholders' interests. "[O]ne cannot act loyally as a corporate director by causing the corporation to violate the positive laws it is obliged to obey.” Guttman v. Huang, 823 A.2d 492, 506 (Del. Ch. 2003). 

A policy of illegal activity is also ultra vires. An ultra vires activity is an activity that is beyond the powers of the directors or officers. Even the broadest certificates of incorporation limit the purpose of the corporation to "any lawful purpose for which a corporation may be organized." A board of directors that attempts to authorize illegal activity is literally acting beyond its scope of authority.