Skip to main content
×
×
Home

Getting Real: Stakeholder Theory, Managerial Practice, and the General Irrelevance of Fiduciary Duties Owed to Shareholders

  • Richard Marens and Andrew Wicks
Abstract:

Stakeholder theorists have generally misunderstood the nature and ramifications of the fiduciary responsibilities that corporate directors owe their stockholders. This fiduciary duty requires the exercise of care, loyalty, and honesty with regard to the financial interests of stockholders. Such obligations do not conflict with the normative goals of stakeholder theory, nor, after a century of case law that includes Dodge Bros. v. Ford, do fiduciary responsibilities owed shareholders prevent managerial policies that are generous or sensitive to other corporate stakeholders. The common law recognizes a multitude of legal relationships between various corporate constituents, and fiduciary duties are only a subset of the obligations that arise from these relationships. This article argues that statute and case law can bring comparable legal protection to constituents other than stockholders, and suggests ways that these protections might be further strengthened. Implications for management education are also discussed.

Copyright
References
Hide All
Berle, Adolph and Means, Gardiner. 1993. The Modern Corporation and Private Property. New York: Commerce Clearing House.
Block, Dennis J.; Barton, Nancy E.; and Radin, Stephen A. 1989 (suppl. 1991). The Business Judgment Rule: Fiduciary Duties of Corporate Directors. Englewood Cliffs, N.J.: Prentice Hall Law and Business.
Boatright, John. 1994. “What’s So Special about Shareholders?Business Ethics Quarterly. 4: 393408.
Brudney, Victor. 1985. “Corporate Governance, Agency Costs, and the Rhetoric of Contract.” Columbia Law Review 85, no. 7: 14031444.
Brudney, Victor. 1980. “Dividends, Discretion, and Disclosure.” Virginia Law Review 66, no. 1: 85129.
Clark, Robert C. 1985. “Agency Costs versus Fiduciary Duties.” In Principals and Agents, ed. Pratt, John and Zeckhauser, Richard. Boston: Harvard University Press.
Cooper, Marc. 1997. “A Town Betrayed.” The Nation, July 14, p. 11.
Donaldson, Thomas and Preston, L. E. 1995. “The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications.” Academy of Management Review 20: 6591.
Elms, Heather and Berman, Shawn L. 1998. “Ethics and Incentives: An Inductive Development of Stakeholder Theory in The Health Care Industry.” Paper presented at the 1997 Western Academy of Management Annual Meeting; currently being prepared for publication.
Evan, William and Edward, R.Freeman. 1983. “A Stakeholder Theory of The Modern Corporation: Kantian Capitalism.” In Ethical Theory in Business, ed. Beauchamp, T. and Bowie, N.Englewood Cliffs, N.J.: Prentice Hall. Pp. 7593.
Fort, Timothy L. 1995. “Corporate Constituency Statutes: A Dialectical Interpretation.” Journal of Law and Commerce 15, no. 1: 257294.
Freeman, Edward R. 1994. “The Politics of Stakeholder Theory: Some Future Directions.” Business Ethics Quarterly 4, no. 4: 409422.
Freeman, Edward R. 1984. Strategic Management: A Stakeholder Approach. Englewood Cliffs, N.J.: Prentice Hall.
Freeman, Edward R. and Gilbert, Daniel R. Jr. 1988. Corporate Strategy and The Search for Ethics. Englewood Cliffs, N.J.: Prentice Hall.
Goodpaster, Kenneth. 1991. “Business Ethics and Stakeholder Analysis.” Business Ethics Quarterly 1: 69.
Goodpaster, Kenneth and Holloran, Thomas E. 1994. “In Defense of a Paradox.” Business Ethics Quarterly 4, no. 3: 42330.
Grimsley, Kirstin Downey. 1997. “Next for Boomers? Battles against Age Bias.” Washington Post, February 2, p. H1.
Hattori, April. 1994. “General Motors Agrees to Seek New Use for Shuttered Plant.” The Bond Buyer, April 15th at 6.
Jardim, Anne. 1970. The First Henry Ford: A Study in Personality and Business Leadership. Cambridge, Mass.: MIT Press.
Johnston, David. 1988. Roman Law of Trusts. Oxford: Claredon Press.
Jones, Tom. 1995. “Instrumental Stakeholder Theory: A Synthesis of Ethics and Economics.” Academy of Management Review 20, no. 2: 404437.
Jones, Tom and Wicks, Andrew C. 1998. “Unified Stakeholder Theory in Management Research.” Paper presented at the 1996 Society for Business Ethics Annual Meeting; currently being developed for publication.
Lieber, James. 1995. Friendly Takeover: How an Employee Buyout Saved a Steel Town. New York: Viking Press.
Lorsch, Jay W. 1989. Pawns or Potentates: The Reality of America’s Corporate Boards. Boston, Mass.: Harvard Business School Press.
Macy, Jonathan, and Miller, Jeffrey. 1993. “Corporate Stakeholders a Contractual Perspective.” University of Toronto Law Journal 63, no. 3: 401424.
Mennell, Robert L. 1994. Wills and Trusts in a Nutshell. St. Paul: West Publishing Co.
Meyer, Stephen. 1981. The Five Dollar Day: Labor Management and Social Control in the Ford Motor Company. Albany: S.U.N.Y. Press.
Mitchell, Lawrence E. 1992. “The Economic Structure of Corporate Law (book review).” Texas Law Review 71, no. 1: 217242.
Mitchell, Lawrence E.; Lawrence, A. Cunningham; and Solomon, Lewis. 1996. Corporate Finance and Governance : Cases, Materials, and Problems. Durham, N.C.: Carolina Academic Press.
Monks, Robert and Minow, Nell. 1991. Power and Accountability. New York: HarperBusiness.
O’Neill, Terry A. 1993. “Employees’ Duty of Loyalty and the Corporate Constituency Debate.” Connecticut Law Review 25, no. 3: 681716.
Singer, Joseph. 1993. “Jobs and Justice: Rethinking the Stakeholder Debate.” University of Toronto Law Journal 63, no. 3: 475510.
Shein, James B. 1996. “A Limit on Downsizing: Varity Corp. v. Howe.” Pepperdine Law Review 24, no. 1: 135.
Stone, Katherine Van Wezel. 1991. “Employees as Stakeholders under State Nonshareholder Constituency Statutes.” Stetson Law Review 21, no. 1: 4572.
Summers, Clyde. 1995. “Worker Dislocation: Who Bears the Burden: A Comparative Study of Social Values in Five Countries.” Notre Dame Law Review 70, no. 5: 10331078.
Von Stange, Gary. 1995. “Corporate Social Responsibility through Constituency Statutes: Legend or Lie?Hofstra Labor Law Journal 11, no. 2: 461497.
Yoshihashi, Pauline. 1992. “Lockheed Ordered to Pay $30 Million to NL Industries.” Wall Street Journal, December 8, p. A10.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Business Ethics Quarterly
  • ISSN: 1052-150X
  • EISSN: 2153-3326
  • URL: /core/journals/business-ethics-quarterly
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed