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expected to complete certain acts while fiduciaries are required
to act under certam motives. In the corporate setting, fiduciary duties do not
impose a requirement that a business be run in a certain manner. No court equates
this duty with "maximizing shareholder value,'"* even assuming such an indeterminate
concept could be estimated. What the duty does require is honesty and
candor in the relationship with the stockholder and a general avoidance of using
one's office for illegitimate personal gain. Traditionally such illegitimate selfdealing
might have meant dealing with another company because a director has
some financial interest in the other concern. A more modern application might
mean keeping stockholders from voting on a tender offer because the inside directois
fear for their jobs. There is nothing in the relationship that absolutely
bars acts of generosity on the part of fiduciaries vvho are not themselves the
beneficiary of the act. unless such generosity can be shown to harm the beneficiary.
Given the modest nature of this duty list, there are at least three reasons to
doubt that they provide any serious obstacle to the implementation of stakeholder
principles. First, it is not obvious that the right of shareholders to expect
honesty, candor, and care on the part of management gives them a higher level
of protection than the legal rights available to other stakeholders. Creditor interests,
for example, are protected by bankruptcy law. Suppliers and customers can
seek redress under the Uniform Commercia] Code or more recent statutes such
as "lemon lavvs'' that cover U'sed car sales. Tort victims are the beneficiaries of
insurance requirements for various kinds of businesses And employees can enlist
government assistance m collecting unpaid wages or compensation for
income-diminishing injuries and can demand fiduciary protection for pension
assets and other benefits (Donaldson and Preston. 1995).
278 BUSINESS ETHICS QUARTERLY
Second, courts are starting to impose on corporate management fiduciary
duties with regard to other groups under certain circumstances. Last year, the
Supreme Court ruled in Varity v. Howe (1996) that a corporation that reorganized
all of Its money-losing ventures into a single subsidiary that eventually
went bankrupt (leaving a healthy surviving parent) had breached its fiduciary
duty to the employees of the subsidiary. The company had not only urged employees
to transfer to the subsidiary without disclosing its precarious condition,
it even transferred the benefit administration of several retirees to the subsidiary
without their knowledge. As a result the parent corporation and several of its
executives were found to have violated duties created under the Employee Retirement
Income Security Act (ERISA) and assumed by corporations that
administer their own benefit plans (Shein, 1996), The Court just recently extended
this reasoning to the protection of non-retirement benefits when it found
for employees dismissed after refusing to accept employment with another company,
but a company with whom their original employer had arranged for them
to do exactly the same work but with reduced benefits {Intermodal v. Sante Fe
Railroad, 1997).
And finally, as we will demonstrate in detail below, when stockholders have
attempted to challenge managerial behavior as being overly generou