Doing Well While Doing Good: Reassessing the Scope of Directors\u27 Fiduciary Obligations in For-Profit Corporations with Non-Shareholder Beneficiaries

This article explores corporate fiduciary duties in the context of for-profit companies that operate in traditionally non-profit spheres. The rise in “privatization”—a conversion from certain businesses being operated by nonprofit and government entities to operation by for-profit companies—has sparked considerable opposition, particularly when it occurs within industries that deliver some societal good such as health care or education. Opponents claim that for-profit companies cannot pay heed to their social or charitable commitments because they must focus on generating profits. In a related debate, many corporate scholars disagree about the proper aim of the corporation—with some insisting that it should serve the interests of its shareholders only, and others contending that the corporation should serve the interests of all of the various constituents on which it impacts. By evaluating the extent to which corporate fiduciary law allows directors and officers of recently privatized firms to make decisions that benefit their public constituencies, even at the expense of shareholder profit, my article explores the corporate law debate through the prism of privatization. My article concludes that corporate law is more flexible than many experts suggest, and hence that it allows directors of newly privatized firms to advance the interests of their beneficiaries even with those interests are in conflict with shareholder concerns. This article was selected to be reprinted in the Corporate Practice Commentator (Robert B. Thompson, ed.)