The Government Controlling Shareholder as a Fiduciary: Implications for Climate Change Management and Litigation

(2024) 35 European Business Law Review

28 Pages Posted: 27 Dec 2023 Last revised: 15 May 2024

See all articles by Ernest Lim

Ernest Lim

National University of Singapore (NUS) - Faculty of Law

Date Written: November 7, 2023


This invited refereed submission to the European Business Law Review is based on the keynote lecture delivered at the University College London (UCL)—European Corporate Governance Institute (ECGI) Biennial Law and Ethics Symposium.

State-owned enterprises (SOEs) have substantial economic and social impact on societies and economies. They are often the cause of and the solution to the climate crisis. As the controlling shareholder of SOEs, the government wields significant legal and economic powers over them. Further, the government shareholder is the second largest type of shareholder after institutional investors. There is a reasonable expectation that the government should act in the exclusive interests of the members of the polity and not for its own partisan ends. However, although the government controller can and has abused its powers and engaged in conflicts of interest, it is not subject to any specific constraints or duties under corporate law in its capacity as the government controller.

I advance a new theory of fiduciary government controlling shareholder that can provide a theoretical and legal basis to evaluate the conduct of the government controller and that can form the basis of a cause of action against it. I argue that the ultimate controlling shareholder of SOEs – the government – should owe fiduciary duties to act in good faith in the public interest and to avoid unauthorised conflicts of interest. I further argue that the direct controlling shareholder of SOEs — the government agency or the company that the government interposes between itself and the SOEs — should owe both first order fiduciary duties to the government (the ultimate controller) and second order fiduciary duties (which include acting in good faith in the public interest). My theory poses a challenge to the prevailing orthodoxies in the US, UK and Commonwealth corporate law and governance. For US corporate law, where the government is the controlling shareholder, my view is that it should owe fiduciary duties to act in the public interest. For UK and Commonwealth corporate law, my theory calls into question the principles that only directors should be regarded as fiduciaries, and that shareholders can generally vote as they please even if doing so is antithetical to the company’s interest.

Finally, I explore the implications of my arguments for climate change management and litigation. I show that the ultimate and direct government controlling shareholders may breach their fiduciary duties if they fail to address climate-related risks as part of their investment approaches, governance structures, monitoring actions, engagement practices and management of conflicts of interest. I then explain the benefits of having breach of fiduciary duties as a possible cause of action in climate change litigation, the most important of which is that it may be easier for the causation requirement to be satisfied.

The arguments in this article may have significant ramifications for corporate law, fiduciary law and private law. On corporate law, I demonstrate that it needs to address the neglected issue of holding the government controlling shareholder accountable and a key mechanism of doing so is by subjecting it to fiduciary duties. On fiduciary law, I show that it can illuminate the administration of an important social and economic institution, i.e. the SOE – which has been overlooked in the fiduciary law literature – by using climate change management and litigation as an illustration. On private law, this article invites us to consider whether fiduciary duties can and should be used to control the exercise of discretionary powers in the public realm, specifically the governmental exercise of social and economic powers through SOEs. After all, despite the differences in the structure, nature and scope of public and private law, there are sufficiently material similarities that have led courts in other contexts to use public law principles to regulate private business relationships. It is thus apposite to consider whether corporate fiduciary law should be used to regulate the governmental shareholder.

Keywords: State-owned enterprises, government, controlling shareholder, fiduciary, fiduciary duties, corporate law, public interest, conflicts of interest, climate change, climate risks, climate litigation

Suggested Citation

Lim, Ernest, The Government Controlling Shareholder as a Fiduciary: Implications for Climate Change Management and Litigation (November 7, 2023). (2024) 35 European Business Law Review , Available at SSRN: or

Ernest Lim (Contact Author)

National University of Singapore (NUS) - Faculty of Law ( email )

469G Bukit Timah Road
Eu Tong Sen Building
Singapore, 259776

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics