Abstract
This article argues that fiduciary duties owed by officer to shareholders are counterproductive, theoretically unsound and unnecessary in practice. Using experimental data from behavioral ethics research, the article shows that fiduciary duties expand the range of morally justifiable behavior, which increases self-serving transactions. This harm is not offset by the constraints created by fiduciary duties because officer fiduciary duties are rarely enforced and almost never result in actual damages paid by the officers themselves.
The article further shows that fiduciary duties owed by officers to shareholders are theoretically unsound. Fiduciary theory is premised on opportunism, vulnerability, entrusted assets and costly monitoring. None of these rationales apply well to officer fiduciary duties because officers are directly monitored by the board and because the shareholders are not the owners of the corporation’s assets. The article draws on recent econometric analysis to show that public company boards closely monitor officers, contrary to the chummy relationships that existed in past decades.
Finally, the article argues that officer fiduciary duties can be eliminated without creating practical harms to the shareholders. It offers better solutions, like more detailed employment contracts, and it offers alternative paths to litigation in last stage games with deceptive officers.
Recommended Citation
Paul D. Weitzel,
The Case Against Officer Fiduciary Duties,
102 Neb. L. Rev. 344
(2023)
Available at: https://digitalcommons.unl.edu/nlr/vol102/iss2/3