16 - Stakeholder Impartiality: A New Classic Approach for the Objectives of the Corporation

Summary

The stockholder/stakeholder dilemma has occupied corporate leaders and corporate lawyers for over a century. In addition to the question of whose interests should managers prioritize in discharging their fiduciary duties, the question of how those interests could or should be balanced has proven equally difficult. To address the latter challenge, this paper advances a doctrinal innovation that is both new and time-honored—to implement a duty of impartiality with regard to directors’ discretion over stakeholder interests. A sub-component of trustees’ duty of loyalty, the duty of impartiality regulates settings in which several beneficiaries have conflicting interests without dictating substantive outcomes, especially not equal treatment. This paper proposes an analogous process-oriented impartiality duty for directors to consider the interests of relevant stakeholders. Stakeholder impartiality is a lean duty whose main advantage lies in its being workable. It can be implemented in legal systems that have different positions on the objectives of the corporation, from Canada’s and India’s open-ended stakeholderist approaches to Delaware’s staunch shareholderism.