Fiduciary Ecosystems: Benefit Corporation Shareholder and Statutory Duties

This Article examines fiduciary duties in benefit corporations and explores how shareholders, corporate boards, and courts might view the potential conflict between traditional shareholder-centric duties and statutory requirements to consider additional interests in corporate decision-making. To clarify conflicting views in the literature on benefit corporations, we distinguish between the depth of ethical analysis required by corporate boards and the breadth of actions boards may take to follow the conclusions of that analysis without risking fiduciary liability. Using a lens of transaction cost limitations on historical agency doctrines, we differentiate between often overlooked general (shallow) delegation of ethical duties in traditional corporations and statute-specific (deep) delegation of ethical duties in benefit corporations. We then distinguish between the nature of fiduciary duties and the range of actionable behavior arising from those duties, arguing that the breadth of action allowed in pursuit of social duties increases for benefit corporation boards, effectively expanding the business judgment rule.

We then show the application of these principles in a model of corporate decision- making that illustrates the “fiduciary ecosystem” of the firm and the value that benefit corporation status has for socially focused businesses and investors. We conclude that while traditional notions of loyalty and care remain formally the same as in traditional corporations, the behavior of corporate boards acting on those duties within this ecosystem can differ significantly in practice.