Constituency Directors and Corporate Fiduciary Duties

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: 3 Oct 2019

See all articles by Martin Gelter

Martin Gelter

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

Genevieve Helleringer

University of Oxford - Institute of European and Comparative Law; ESSEC Business School; European Corporate Governance Institute (ECGI); EUSFIL Jean Monnet Centre of Excellence

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, Genevieve, Constituency Directors and Corporate Fiduciary Duties (October 17, 2013). 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)

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Genevieve Helleringer

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

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ESSEC Business School ( email )

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EUSFIL Jean Monnet Centre of Excellence ( email )

Italy

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