The Fiduciary Responsibility of Directors to Preserve Intergenerational Equity

37 Pages Posted: 16 Nov 2017 Last revised: 18 Apr 2019

Date Written: November 14, 2017

Abstract

The well-being of generations yet to come must necessarily be an important concern for the present. As an extension of Rawls’ ‘just savings’ principle, one of the arguments for sustainable development is that of intergenerational equity - the idea that future generations must have the same access to natural resources as the present generation.

In this article, I attempt to reconcile the divergent positions of the shareholder and stakeholder primacy debate by proposing that directors - acting for the corporation - should preserve intergenerational equity. Three arguments are presented in course of this proposition.

Firstly, corporations are perpetual in nature and their continuing existence is predicated upon the ability of individual owners to transfer their ownership. Second, directors have a higher fiduciary duty to the corporation and future shareholders, over that of present shareholders. Finally, in order to safeguard the interests of future shareholders, corporations must necessarily strive to preserve the natural and social environments upon which the future of the corporation and the wealth of future shareholders depends.

This paper was originally presented at the 4th Bergamo-Wharton Joint Conference organized by the Department of Management, Economics and Quantitative Methods of the University of Bergamo and the Department of Legal Studies and Business Ethics of the Wharton School on 1st–2nd July 2016. The author is grateful to Ms. Chinar Gupta, BBA LLB student, Class of 2014, Jindal Global Law School for her research assistance.

Keywords: Intergenerational Equity, Fiduciary Duties, Business Law

JEL Classification: K12, K22

Suggested Citation

Majumdar, Arjya, The Fiduciary Responsibility of Directors to Preserve Intergenerational Equity (November 14, 2017). Journal of Business Ethics, 1-12 (2017) doi:10.1007/s10551-017-3739-4, Available at SSRN: https://ssrn.com/abstract=3070905

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