Fiduciary Duty, Risk, and Shareholder Desert

Abstract

ABSTRACT:A common moral argument is that shareholders have a special status because of risk when considering the duties of corporate management. The privileges of this status usually include the idea that management should adopt the goal of maximizing shareholder wealth. We argue that modern financial theory demonstrates that this argument should be modified by the recognition of a principle of desert, the shareholder desert principle (SDP). Financial theory can usefully circumscribe the duty owed to shareholders and the extent to which risk bearing justifies a claim on corporate value. When combined with the SDP, the result provides management with a guideline for what is owed to shareholders before other stakeholder non-contractual claims may be satisfied. As such, our approach provides management with some guidance through the thicket of competing stakeholder claims.

Exploring the Problem of Supervising Financial Funds Based on Fiduciary Duty

“…Fiduciary duty has different connotations in different areas. In the field of accounting, fiduciary responsibility refers to the fact that while the owner of a resource transfers the right to use the resource, the manager of the resource is entrusted with the responsibility to use the resource to complete the relevant work in accordance with the wishes of the owner of the resource, and the owner of the resource supervises the fulfilment of the duties of the manager of the resource [1] . For financial funds, the public gives up part of their private property and concentrates the resources in the government in the form of taxes, forming the first level of entrustment; the government transfers the financial funds to the financial allocation unit (the relevant functional department), forming the second level of entrustment, and the financial allocation unit, as the final trustee, assumes the fiduciary responsibility of ultimately realising the will of the public.…”

Theorising the Fiduciary: Ontology and Ethics

“…There are several contemporary debates regarding the fiduciary spanning multiple disciplines including law, philosophy (specifically philosophy of finance and jurisprudence), and economics, alongside contributions in the business ethics literature. Predominant debates in the latter focus on how fiduciary duty affects stakeholder and shareholder relations (Hawley & Williams, 2000;Heath, 2006;Kaufman, 2002), how it guides the principal-agent relationship and ethical decision making (Marens & Wicks, 1999;Young, 2007), and how the fiduciary is used to validate shareholder value maximisation (Sollars & Tuluca, 2018), but there is little focus on directly theorising the fiduciary as a concept, although some authors have offered helpful historical analyses of conceptual development (Avini, 1995;Graziadei, 2014;Young, 2007).…”

Divested: Inequality in the Age of Finance, by Ken-Hou Lin and Megan Tobias Neely. New York: Oxford University Press, 2020. 232 pp.

“…However, there are more plausible and less extreme views that would still license the changes to corporate governance to which they object. We may think that managers still have an obligation to pay shareholders at the cost of equity (Sollars & Tuluca, 2018), say, as long as that price is fair (Silver, 2019). In any case, I imagine most business ethicists will not think that managers should be totally unbeholden to shareholders.…”