The Fiduciary Duty of Shareholders

This paper examines the relationship between corporations and their stakeholders using rudimentary game theory concepts. It argues that barring legal restrictions, the equilibrium of this relationship is likely to be inefficient. Surveying various possible legal solutions for this problem, the paper argues for a fiduciary duty of shareholders to their corporation in actions and transactions which grant them a certain degree of control over the company. The paper then suggests guidelines for the efficient scope of such a duty and the types of actions that invoke the duty.