6 - Stakeholder Fiduciaries

Summary

This chapter coins the term “stakeholder fiduciary” to describe fiduciaries who are formal beneficiaries of their own exercise of fiduciary power. The fiduciary duty of loyalty applies differently to stakeholder fiduciaries, requiring not complete self-abnegation, but rather solidarity with other beneficiaries. Accordingly, a stakeholder fiduciary may retain an equitable share of the profits she generates through her position—even when such profits are the product of conflicted transactions or misappropriated opportunities. More striking still, when a stakeholder fiduciary participates in collective governance, she is entitled to vote exclusively in her own interests as long as she does not abuse her voting power to dominate other beneficiaries or undermine the purposes of the fiduciary relationship.

The chapter argues further that American courts give extra deference to the decisions of stakeholder fiduciaries. As long as a stakeholder fiduciary’s interests are plausibly consistent with the interests of other beneficiaries, courts will allow her to decide for herself how much time and energy she should devote to a particular decision. The best explanation for this deferential standard is that courts trust stakeholder fiduciaries to exercise due care without intrusive judicial oversight precisely because these fiduciaries have a direct stake in their own successful performance.