Debunking the Corporate Fiduciary Myth‪.‬

I. INTRODUCTION The doctrine of corporate fiduciary obligation-which holds that corporate officers and directors are fiduciaries of the corporation and its shareholders and are disciplined primarily through the enforcement of fiduciary duties-has been the core basis of all corporate law. However, today that doctrine is little more than a fiction. The emperor wears no clothes. The common law has developed in such a way that the relationship among corporate officers, directors, and the firm should no longer be characterized as a fiduciary one. Corporate managers (1) are not entrusted with "open-ended" control, (2) and corporate practice has gone beyond the expectation that managers will put the shareholders' or corporation's best interests before their own. It is now customary to assume that managers will hold their own personal interests paramount and to exploit that self interest by using incentive compensation as a way to direct managerial behavior and decision-making. Such employment incentives and market forces do far more to monitor corporate decision makers than any supposed sense of loyalty or fiduciary obligation. When market forces can or do adequately constrain agency costs, the relationship in question is no longer properly regarded as fiduciary' (3)