MANAGEMENT RELATION: OR, WHAT'S SO SPECIAL ABOUT SHAREHOLDERS?

The claim that managers have a fiduciary duty to shareholders to run the corporation in their interests is generally supported by two argu? ments: that shareholders are owners of a corporation and that they have a contract or agency relation with management. The latter argument is used by Kenneth E. Goodpaster, who rejects a multi-fiduciary, stake? holder approach on the grounds that the shareholder-management rela? tion is "ethically different" because of its fiduciary character. Both of these arguments provide an inadequate basis for the fiduciary duties of officers and directors of corporations. The basis is to be found, rather, in consid? erations of public policy, a point that was established in the Dodd-Berle exchange of the 1930s. This conclusion also shows the inadequacy of Goodpaster's solution to the so-called stakeholder paradox, and an alter? native solution to the paradox is presented.