Constituency Directors and Corporate Fiduciary Duties

Forthcoming: The Philosophical Foundations of Fiduciary Law (Andrew Gold & Paul Miller eds., Oxford University Press, 2014)

Fordham Law Legal Studies Research Paper No. 2341660

25 Pages Posted: 19 Oct 2013 Last revised: 12 Nov 2013

Martin Gelter

Fordham University School of Law; European Corporate Governance Institute (ECGI)

Geneviève Helleringer

ESSEC Business School; University of Oxford - Institute of European and Comparative Law

Date Written: October 17, 2013

Abstract

In this chapter, we identify a fundamental contradiction in the law of fiduciary duty of corporate directors across jurisdictions, namely the tension between the uniformity of directors’ duties and the heterogeneity of directors themselves. Directors are often formally or informally selected by specific shareholders (such as a venture capitalist or an important shareholder) or other stakeholders of the corporation (such as creditors or employees), or they are elected to represent specific types of shareholders (e.g. minority investors). In many jurisdictions, the law thus requires or facilitates the nomination of what has been called “constituency” directors. Legal rules tend nevertheless to treat directors as a homogeneous group that is expected to pursue a uniform goal. We explore this tension and suggest that it almost seems to rise to the level of hypocrisy: Why do some jurisdictions require employee representatives that are then seemingly not allowed to strongly advocate employee interests? Looking at US, UK, German and French law, our chapter explores this tension from the perspective of economic and behavioral theory.

Keywords: constituency directors, codetermination, venture capital, fiduciary duties, corporate theory, theory of the firm, board of directors

JEL Classification: K22, G24

Suggested Citation

Gelter, Martin and Helleringer, Geneviève, Constituency Directors and Corporate Fiduciary Duties (October 17, 2013). Forthcoming: The Philosophical Foundations of Fiduciary Law (Andrew Gold & Paul Miller eds., Oxford University Press, 2014); Fordham Law Legal Studies Research Paper No. 2341660. Available at SSRN: https://ssrn.com/abstract=2341660 or http://dx.doi.org/10.2139/ssrn.2341660

Martin Gelter (Contact Author)

Fordham University School of Law ( email )

150 West 62nd Street
New York, NY 10023
United States
646-312-8752 (Phone)

HOME PAGE: http://www.fordham.edu/info/23135/martin_gelter

European Corporate Governance Institute (ECGI)

Brussels, B-1050
Belgium

HOME PAGE: http://www.ecgi.org/members_directory/member.php?member_id=621

Geneviève Helleringer

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

University of Oxford - Institute of European and Comparative Law ( email )

St Cross Building
St Cross Road
Oxford, OX1 3UL
United Kingdom

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