This and That
The Two Daniels

Shareholders and Stakeholders

(length warning) For most of the 20th century, corporations recognized that shareholders were not the only stakeholders: that the law implied (but alas, did not state) that corporate officers had a fiduciary duty to their community and their employees.

Then along came GE’s Jack Welch and his ilk: our ONLY stakeholders are shareholders. Everyone else can go spit.

You know what he did to GE; if not, you can look it up. But to make American corporations once again reasonable and responsible citizens would not require much. Make it a matter of law that communities and employees (and maybe even customers) are stakeholders and that they are owed either a duty of care or a fiduciary duty.

My father, a milkman and devout Teamster, came back every year from the employee meeting with management (of which there was only one), with the same complaint. “Management are idiots. Every year they say they are going out business.” Ironically, I ended up majoring in management, although it took me 25 years to practice it (for two years).

Alas, eventually his dairy did go out of business. But thanks to the Teamsters, my dad kept his seniority, his benefits and his pension; the last because of a brilliant Teamster innovation: the union ran the pension fund, not the individual employers. Your employer goes bankrupt? Your pension is fine. I’ll bet my fellow UPI alumni wish the Wire Service Guild was managing their pension.

Along this line, Dad never begrudged Hoffa his corrupt use of the Central State Teamsters Fund to build Las Vegas for the mob. For one thing, dad was part of the Western States Teamsters fund. More importantly to him, “Central States never lost a dime. Mobsters pay their bills.”


Robert E. Malchman

I would be fascinated to know where the law ever implied a fiduciary duty from corporate officers to employees or "the community," whatever that might mean, because it sounds like utter nonsense to me. "Fiduciary duty" is a common-law doctrine requiring "the highest punctilio of honor," as Cardozo put it, and existed and exists only from agents to principals, trustees to beneficiaries, professionals (e.g., lawyers, doctors) to clients. If there were a fiduciary duty from corporations or their officers to employees or "the community," there would be no need for statutory employment law or corporate regulations; all of those relationships would be governed by common-law fiduciary duty analysis. Those statutory enactments limit the reach of fiduciary duty analysis as to what corporations owe their shareholders -- one cannot fulfill one's fiduciary duty to shareholders by breaking the law.

As for management/organized labor, you have your anecdote, and I have mine: When I was clerking for a federal judge, the cases I hated most were labor law disputes. The quality of the lawyering on both sides was abominably low, and both sides lied regularly -- about the facts in the record and about the law. Their persistent dishonesty needlessly made work for me because I could not for a moment rely on either side's brief. I had to research the law from square one and review the entire record to point out all the lies they were telling the court. Management is scum. Unions are scum. A pox on both their houses.

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