keholdertheory. First, as Goodpaster argued (1991), legal obligations subsumed underthe rubric of fiduciary will not readily lend themselves to all stakeholder relationships.
Second, there is no reason to assume, and empirical reasons to doubt,
that owing a duty to one class of stakeholders creates serious practical constraintsupon how the law allows managers to treat other groups.
This paper develops this argument through five sections. We begin by summarizingthe discussion of the "stakeholder paradox"' that allegedly arises fromthe fiduciary duties of corporate managers. This is followed by an explanationof the precise nature of these duties owed to stockholders. Next, the paper willargue that a century of legal precedent generally permits management the freedom
to adopt and implement a stakeholder approach with regard to various
constituencies. We then show that while fiduciary obligations do little to limitmanagerial autonomy to do so, no current statute or common law principles compela full-scale stakeholder approach. The paper then proposes a new extensionof legal doctrine to encourage such an approach and finally concludes by discussingimplications for theory and teaching.
The "Stakeholder Paradox"Since Freedman's (1984) seminal book on stakeholder theory appeared inprint, scholars of business ethics have increasingly used stakeholder theory as aconceptual framework to discuss the ethical dimensions and implications of corporate
activity. Freeman began the discussion by arguing that successful managersmust systematically attend to the interests of various stakeholder groups. Laterpieces, including contributions by Freeman himself (Evan and Freeman, 1983;Freeman and Gilbert, 1988; Donaldson and Preston, 1995), moved beyond this
"enlightened self-interest" position by taking the more radical position that theinterests of stakeholders have intrinsic worth irrespective of whether these advancethe interests of shareholders. Under this view, the success of a firm is notmerely an end in itself but should also be seen as providing a vehicle for advancingthe interests of stakeholders other than shareholders.
IRRELE\^NCE OF FIDUCIARY DUTIES TO SHAREHOLDERS 275
Since each class of stakeholder has a different legal, economic, and socialrelationship to a particular business, a general stakeholder approach does notexplain how managers should balance different kinds of dependencies. Particularlytroublesome is the legal reality that managers owe shareholders a "fiduciary"duty not generally granted to any other group. While Donaldson and Preston(1995) are correct in pointing to contractual obligations and regulatory responsibilities
designed to protect other groups from specific malefeasances such as
discrimination or pollution, we argue below that Goodpaster (1991, 1994) wasalso accurate in characterizing the duty to stockholders as more general and proactivethan what other constituencies can claim.
Goodpaster, however, goes further than this by insisting on a potential conflictarising out of this legal asymmetry, arguing for the existence of a "stakeholderparadox." where corporate management would find themselves (under all butthe most ideal circumstances) having to choose between fulfilling this fiduciaryduty and serving the interests of other stakeholders. Boatright (1994) arguedthat this paradox could be overcome by extending the fiduciary duty to coverother stakeholders, a suggestion criticized by Good
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