Awful lot of people are under the false impression that corporate executives have a fiduciary duty to shareholders.This caught my attention because I am one of those people under the allegedly false impression that "executives" of businesses owe fiduciary duties to the company and its shareholders. In fact, I thought this was just a specific case of the general principal that all agents are fiduciaries, and all employees of corporations are its agents. Officers (i.e., "executives"), as the company's most powerful agents in its day-to-day affairs, surely must comply with the duties of care and loyalty, right?
— Matt Yglesias (@mattyglesias) August 1, 2013
And yet, here was the learned legal scholar* Matthew Yglesias breezily dismissing my understanding of corporate law and substantive principles of agency.
My first thought was that maybe this was just sarcasm. But a subsequent Yglesias tweet clarified that he believed only directors, not mere "executives," owed anyone fiduciary duties. This was like a punch in the gut. Could I really have misunderstood something so fundamental?
Of course not. Ygelesias is dead, stupid wrong. For example, here is the Delaware Supreme Court, in Gantler v. Stephens:
[W]hether or not officers owe fiduciary duties identical to those of directors has been characterized as a matter of first impression for this Court. In the past, we have implied that officers of Delaware corporations, like directors, owe fiduciary duties of care and loyalty, and that the fiduciary duties of officers are the same as those of directors. We now explicitly so hold.Notably, this was a principle that was so obviously true that the Delaware Supreme Court hadn't actually ever gotten around to explicitly holding it until 2009—likely because no lawyer could come up with a non-trivial argument to the contrary. This is because, as I noted above, the existence of these duties flows naturally from the agency relationship. The only conceivable theoretical question would be the scope of the duties, which can vary depending on the nature of the agency relationship. This is why the question in Gantler wasn't whether officers have fiduciary duties, but only whether they are "identical" to the fiduciary duties of directors. And they are.
*Correction: Mr. Yglesias is not a scholar, much less a legal scholar, but he is a college graduate who is able to write very fast.