Common law damages cannot be awarded in respect of a purely equitable wrong such as breach of trust or breach of fiduciary duty. Instead, a compensatory remedy has developed in equity’s exclusive (or inherent) jurisdiction: equitable compensation. This remedy originated in cases involving breach of trust, although for many years it was not explicitly recognised as a compensatory remedy and was known instead as one of the forms of ‘account’ that a trustee must make when a breach of trust occurs. It is therefore necessary to have a brief look at the main forms of account, which are still used today.

A key component of agency cost theory is that, if left to their own devices, managers will behave in self-interested ways. Natural experiments created by the adoption of constituency statutes, corporate opportunity waivers, tax windfalls, and legal changes to the corporate fiduciary duty show that even when given the freedom to engage in self-interested behavior, managers remain faithful stewards of the firm and remain focused on maximizing profits. Despite agency cost theory’s assumption that managers are self-interested, managers appear to be generally trustworthy. Even if some managers are inclined to behave in strongly self-interested ways, most of them are constrained by competitive markets, which provide little room for slack and diversion. Charlie Brown kicking a football makes an improbable appearance.

Scores of lawsuits have pushed retirement plan sponsors to shorter, easier-to-navigate menus, but – as Ian Ayres and Quinn Curtis argue in this work – we’ve only scratched the surface of retirement plan design. Using participant-level plan data and straightforward tests, Ayres and Curtis show how plan sponsors can monitor plans for likely allocation mistakes and adapt menus to encourage success. Beginning with an overview of the problem of high costs and the first empirical evidence on retirement plan fee lawsuits, they offer an overview of the current plan landscape. They then show, based on reforms to a real plan, how streamlining menus, eliminating pitfalls, and adopting static and dynamic limits on participant allocations to certain risky assets or “guardrails” can reduce mistakes and lead to better retirement outcomes. Focusing on plausible, easy-to-implement interventions, Retirement Guardrails shows that fiduciaries need not be limited to screening out funds but can design menus to actively promote good choices.

One of the key claims of advocates of stakeholder capitalism, especially those in the legal academy, is that the foundational case – Dodge v. Ford Motor Co. – was not good law when it was first written, the key part of the decision, is mere dicta, and subsequent legal developments have undercut whatever validity the decision may have had at one time. All of these claims are demonstrably false. As Chief Justice Leo Strine put it, those who claim that shareholder value maximization is not the law are pretending.

Shareholder value maximization is the law. It ought to be the law. This is, in part, because the chief alternative available in liberal democratic societies – stakeholder capitalism – is fundamentally flawed. If executives such as those who signed the Business Roundtable’s 2019 statement on corporate purpose really tried to run their companies according to the altruistic principles laid out therein, they would find it an impossible task. Developing the set of objective and quantifiable metrics necessary to operationalize stakeholder capitalism will prove an intractable problem. Even if the requisite set of metrics could be designed, boundedly rational managers cannot reasonably be expected to balance the huge number of competing factors necessary to account for the varied interests of the firm’s many constituencies.

AP Smith Mfg. Co. v. Barlow is the seminal case on the fiduciary duties of corporate directors with respect to profit maximization and corporate philanthropy. The chapter provides the factual context of the case and analyzes the law. The chapter situates the case in the famous debate between Adolf Berle and E. Merrick Dodd over shareholder value maximization. It provides context for the business communitys approach to shareholder capitalism.

There are very few cases holding directors liable for failing to maximize shareholder value. The reason is the business judgment rule, a corporate law doctrine that precludes judges from reviewing the merits of director decisions absent some evidence of fraud, illegality, self-dealing, failure to make an informed decision, or waste of corporate assets. Shlensky v. Wrigley is the classic case of the business judgment rules application to cases in which the directors are alleged to have failed to maximize profit.

Defines the terms corporation, corporate purpose, shareholder value maximization, stakeholders, stakeholder capitalism, corporate social responsibility, and ESG (environmental, social, and governance). Provides the plan of the work.

Stakeholder capitalism results in a loss of accountability, as executives who are responsible to everyone are responsible to no one. Stakeholder capitalism would be extremely difficult to implement. Proposed means of doing so – such as constituency boards, codetermination, and team production – are all unworkable. Stakeholder capitalism is inconsistent with democratic capitalism. Shareholder value maximization is the result that would emerge if shareholder and stakeholders could bargain (the so-called hypothetical bargain). Shareholder capitalism is pro-social. The profit motive results in socially efficient resource allocation. The profit motive is an essential motivational spark for innovation. The profit motive promotes freedom.

Dodge v. Ford Motor Co. is the seminal case on the fiduciary duties of corporate directors with respect to profit maximization. The chapter provides the factual context of the case and analyzes the law.

Meinhard v. Salmon found a heightened duty of loyalty among joint adventurers: the duty of finest loyalty. Famously, Chief Judge (and later, Associate Justice of the United States Supreme Court) Cardozo wrote that trustees are held to “not honesty alone, but the punctilio of an honor the most sensitive.” Professor Christine Hurt comments on the missing history surrounding the relationship of Meinhard and Salmon and the condition of the United States at the time the underlying transactions took place. Professor Dalia Mitchell, rewriting the Meinhard opinion as Justice Mitchell, reaches the same conclusion but through vulnerability theory and the feminist widening the lens method. In doing so, she considered the history, context, and persons affected by the outcome in a way unique to the rewritten opinion. The original opinion is critiqued for essentially providing the utmost care or no duty whatsoever with nothing in between. Notably, the initial decision only takes the contractual relationship between Meinhard and Salmon into account. Under vulnerability theory, the opinion should consider the overall context of joint adventurers’ relationships to reach more equitable decisions.

Sunita Malepati’s commentary describes how number of minority shareholders brought suit against a family-owned supermarket, Market Basket, with a history of treating employees and other stakeholders well. A group of minority shareholders had offered to sell their shares to a third party, and CEO Arthur T. Demoulas resisted, arguing that the shareholders could not sell their stock if it would imperil the corporation’s tax status. The original opinion found that the shareholders could sell their shares to whom they pleased, regardless of how it might impact the corporation. The feminist judgment rejects the original opinion, applying a feminist ethic-of-care lens and embracing a feminist-informed stakeholder theory of corporate governance. Rather than replicating the shareholder primacy model’s privileging of shareholder-owners, the feminist judgment vindicates the interests of the corporation’s employee-stakeholders and community the corporation serves—each ethnically and socioeconomically diverse groups.

In re Walt Disney Company Derivative Litigation iconically revealed the latitude the Chancery Court gives boards when using the business judgment rule. The business judgment rule presumes that “directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interest of the company.” The burden is on the plaintiff to show that duties were breached and that the directors acted in bad faith, but both the Chancery Court and the Delaware Supreme Court ruled it had not. Professor Hillary Sale, rewriting the Delaware Supreme Court’s opinion as Justice Sale, suggests an alternative “inclusive process” that sets a higher ideal for corporate governance Sale urges boards to ask follow-up questions, explain different assessments, and listen to and weigh multiple viewpoints. In her commentary on the rewritten Disney opinion, Professor Laura Rosenbury contextualizes Sale’s approach by comparing its relational reasoning to similar insights of feminist scholars in other legal fields at the time, and also by situating the facts giving rise to the Disney litigation in light of the company’s and broader economy’s then-prosperity. Professor Rosenbury also highlights the intersectional strengths of Sale’s rewritten judgment.

Jessica Kiser situates the chapter, explaining that the plaintiff in Donahue was a minority shareholder who sued the company and its directors for breach of fiduciary on account of causing the company to purchase the stock of a former director and controlling shareholder, but refusing to treat her equally by purchasing her shares at the same price. The court held that the company and its directors had breached their fiduciary duty, reasoning that shareholders in a close corporation owe a heightened standard of good faith and loyalty as compared to public companies. Cindy Schipani’s feminist judgment preserves the original opinion’s holding, but expands on the nature of the Donahue’s oppression – not just as a minority shareholder, but as a woman shut out of employment opportunities by virtue of class and gender. Kiser highlights the intersectionality of Schipani’s rewritten opinion.

Mrs. Pritchard became the director of a family-owned reinsurance firm, Pritchard & Baird Intermediaries Corp (P & B), following the death of her husband. Mrs. Pritchard’s two sons were executives of the company, which eventually went bankrupt. The plaintiff, trustee of the P & B’s bankruptcy estate, filed this suit against the deceased Mrs. Pritchard’s estate claiming she was negligently liable as director for the over $10 million her sons improperly removed from the firm. The feminist rewrite agrees with the original opinion that Mrs. Pritchard was negligent in her role of corporate oversight, but it deviates by arguing Mrs. Pritchard was not negligent for failure to notice the financial issues because she should not have been expected to understand the intricacies of the business of which she served mostly as the figurehead and emotional glue. The rewritten opinion points out the implicit bias built within the New Jersey directors’ duty statute, which refers to “prudent men.” The commentary argues Mrs. Pritchard chose not to extend great care because she was not compensated or given much actual power within P & B. The commentary also critiques the rewritten opinion’s dismissiveness of Mrs. Pritchard’s corporate knowhow as not feminist enough.

A successful claim against the fiduciary may result in an award of compensation for loss, disgorgement of gain or restitution of property misappropriated by the fiduciary. But it will sometimes be impossible for the plaintiff to obtain complete relief, particularly if the fiduciary is insolvent or beyond the jurisdiction of the court. In some of these cases, the plaintiff may be able to pursue third parties who participated in the breach of duty. The principles governing the imposition of liability on participants are discussed in this chapter. This chapter principally examines the liability of third parties under the so-called ‘two limbs’ of Barnes v Addy. Liability under the first limb arises when the defendant has knowingly received property in breach of fiduciary duty. Liability is imposed under the second limb on a defendant who knowingly assists the commission of a breach of fiduciary duty. But, as the cases make clear, third parties can be held accountable on other equitable grounds. Finally, a common law claim can sometimes be brought in unjust enrichment against the third party which does not require proof of a breach of fiduciary duty.

The availability of finance is a key requirement for action to mitigate and adapt to climate change. Several studies show that companies responding to ESG (environement, sustainability and governance) principles generally outperform others financially. There is strong growth of the sustainable finance sub-sector but off a low base. Fiduciary duty now is generally understood to include the need to take into account climate chage in decision-making and the exposure of company directors is growing exponentially. With falling prices, renewables are now being adopted by many leading companies for their own energy requirements. Green bonds and other climate-friendly financial instruments are in growing demand but large global financial institutions continue to direct a larger proportion of funds to fossil fuels than to ESG-rated investments including renewables. The present rate of growth of sustainable finance is not sufficient to meet climate goals for limiting emissions. The chapter recommends actions by governments to change this situation.