An Economic Analysis of the Various Rationales for Making Shareholders the Exclusive Beneficiaries of Corporate Fiduciary Duties

Under traditional state and corporate law doctrine, officers and directors of both public and closely held firms owe fiduciary duties to shareholders and to shareholders alone. Directors and officers are legally required to manage a corporation for the exclusive benefit of its shareholders, and protection for other sorts of claimants exists only to the extent provided by contract. This legal norm, however, has been subjected to considerable stress as a result of recent legislative action in a majority of states that authorizes (or, in the case of one state, requires) directors to take into account the interests of other constituencies such as employees, suppliers, customers, and the local community in making business decisions. This Article examines the three primary criticisms that have been levelled at the nonshareholder constituency statutes