IDEAS home Printed from https://ideas.repec.org/a/kap/jbuset/v119y2014i3p365-380.html
   My bibliography  Save this article

Reason, Rationality, and Fiduciary Duty

Author

Listed:
  • Steve Lydenberg

Abstract

This paper argues that since the last decades of the twentieth century the discipline of modern finance has directed fiduciaries to act "rationally"—that is, in the sole financial interest of their funds--downplaying the effects of their investments on others. This approach has deemphasized a previous, more "reasonable" interpretation of fiduciary duty that drew on a conception of prudence characterized by wisdom, discretion and intelligence—one that accounts to a greater degree for the relationship between one's investments and their effects on others in the world. The reasonable approach allows fiduciaries to a greater degree to assess the objective well-being of beneficiaries, to recognize fundamental sources of investment reward in the economy, and to fulfill their obligations to allocate benefits impartially between current and future generations. Reason and rationality can work in a complementary fashion to make investment long-term in its perspective and beneficial to society and the economy as well as to specific funds or portfolios. Determining how to accomplish this challenging task is part of the obligation of fiduciaries as they seek to realize the full potential of the investment assets entrusted to their care. Copyright Springer Science+Business Media Dordrecht 2014

Suggested Citation

  • Steve Lydenberg, 2014. "Reason, Rationality, and Fiduciary Duty," Journal of Business Ethics, Springer, vol. 119(3), pages 365-380, February.
    • Handle: RePEc:kap:jbuset:v:119:y:2014:i:3:p:365-380
    DOI: 10.1007/s10551-013-1632-3
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10551-013-1632-3
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10551-013-1632-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. World Commission on Environment and Development,, 1987. "Our Common Future," OUP Catalogue, Oxford University Press, number 9780192820808.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Helen Mussell, 2019. "Elucidating Limited Shareholder Engagement: Identifying Ethical and Epistemological Factors in the Fiduciary," Working Papers wp516, Centre for Business Research, University of Cambridge.
    2. Bertrand Malsch & Marie-Soleil Tremblay & Jeffrey Cohen, 2022. "Non-audit Engagements and the Creation of Public Value: Consequences for the Public Interest," Journal of Business Ethics, Springer, vol. 178(2), pages 467-479, June.
    3. Kosheek Sewchurran & Johan Dekker & Jennifer McDonogh, 2019. "Experiences of Embedding Long-Term Thinking in an Environment of Short-Termism and Sub-par Business Performance: Investing in Intangibles for Sustainable Growth," Journal of Business Ethics, Springer, vol. 157(4), pages 997-1041, July.
    4. Isaline Thirion & Patrick Reichert & Virginie Xhauflair & Jonathan Jonck, 2022. "From Fiduciary Duty to Impact Fidelity: Managerial Compensation in Impact Investing," Journal of Business Ethics, Springer, vol. 179(4), pages 991-1010, September.
    5. Céline Louche & Timo Busch & Patricia Crifo & Alfred Marcus, 2019. "Financial Markets and the Transition to a Low-Carbon Economy: Challenging the Dominant Logics," Post-Print hal-02016756, HAL.
    6. Gordon Menzies & Donald Hay & Thomas Simpson & David Vines, 2019. "Restoring Trust in Finance: From Principal–Agent to Principled Agent," The Economic Record, The Economic Society of Australia, vol. 95(311), pages 497-509, December.
    7. Boyu Li & Lishan Li & Tianlei Pi, 2022. "Is the R&D Expenditure of Listed Companies Green? Evidence from China’s A-Share Market," IJERPH, MDPI, vol. 19(19), pages 1-16, September.
    8. Helen J. Mussell, 2023. "Theorising the Fiduciary: Ontology and Ethics," Journal of Business Ethics, Springer, vol. 186(2), pages 293-307, August.
    9. Stefan Ouma, 2020. "This can(’t) be an asset class: The world of money management, “society†, and the contested morality of farmland investments," Environment and Planning A, , vol. 52(1), pages 66-87, February.
    10. Eleanor Burt & Samuel Mansell, 2019. "Moral Agency in Charities and Business Corporations: Exploring the Constraints of Law and Regulation," Journal of Business Ethics, Springer, vol. 159(1), pages 59-73, September.
    11. Neil Stuart Eccles, 2018. "Remarks on Lydenberg’s “Reason, Rationality and Fiduciary Duty”," Journal of Business Ethics, Springer, vol. 151(1), pages 55-68, August.
    12. Shu Ling Lin & Jun Lu & Jung-Bin Su & Wei-Peng Chen, 2018. "Sustainable Returns: The Effect of Regional Industrial Development Policy on Institutional Investors’ Behavior in China," Sustainability, MDPI, vol. 10(8), pages 1-28, August.
    13. Greg Filbeck & Timothy A. Krause & Lauren Reis, 2016. "Socially responsible investing in hedge funds," Journal of Asset Management, Palgrave Macmillan, vol. 17(6), pages 408-421, October.
    14. Amiruddin BIN MUHAMED & Rebecca STRÄTLING & Aly SALAMA, 2014. "The Impact Of Government Investment Organizations In Malaysia On The Performance Of Their Portfolio Companies," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 85(3), pages 453-473, September.
    15. Clare Jane M. Burns & Luke Houghton & Heather Stewart, 2020. "Sustainability – A key to Australian finance directors improving their organisation's CSR culture," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 1164-1176, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. CHEN, Helen S.Y., 2020. "Designing Sustainable Humanitarian Supply Chains," OSF Preprints m82ar, Center for Open Science.
    2. Denise Ravet, 2011. "Lean production: the link between supply chain and sustainable development in an international environment," Post-Print hal-00691666, HAL.
    3. Mara Del Baldo, 2012. "Corporate social responsibility and corporate governance in Italian SMEs: the experience of some “spirited businesses”," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(1), pages 1-36, February.
    4. Michael Howes & Liana Wortley & Ruth Potts & Aysin Dedekorkut-Howes & Silvia Serrao-Neumann & Julie Davidson & Timothy Smith & Patrick Nunn, 2017. "Environmental Sustainability: A Case of Policy Implementation Failure?," Sustainability, MDPI, vol. 9(2), pages 1-17, January.
    5. Parnphumeesup, Piya & Kerr, Sandy A., 2011. "Stakeholder preferences towards the sustainable development of CDM projects: Lessons from biomass (rice husk) CDM project in Thailand," Energy Policy, Elsevier, vol. 39(6), pages 3591-3601, June.
    6. Chin-Shan Lu & Kuo-Chung Shang & Chi-Chang Lin, 2016. "Examining sustainability performance at ports: port managers’ perspectives on developing sustainable supply chains," Maritime Policy & Management, Taylor & Francis Journals, vol. 43(8), pages 909-927, November.
    7. Kebede, Yohannes, 1993. "The Limits to Common Resource Management: The Bypassed Commons or Commons without Tragedy," MPRA Paper 662, University Library of Munich, Germany, revised 01 May 1993.
    8. John Stanley & Janet Stanley, 2023. "Improving Appraisal Methodology for Land Use Transport Measures to Reduce Risk of Social Exclusion," Sustainability, MDPI, vol. 15(15), pages 1-18, August.
    9. Nora Mzavanadze, 2009. "Building A Framework For National Sustainable Development Assessment And Application For Lithuania: Sustainability In Transition," Journal of Environmental Assessment Policy and Management (JEAPM), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 97-130.
    10. Pishchulov, Grigory & Trautrims, Alexander & Chesney, Thomas & Gold, Stefan & Schwab, Leila, 2019. "The Voting Analytic Hierarchy Process revisited: A revised method with application to sustainable supplier selection," International Journal of Production Economics, Elsevier, vol. 211(C), pages 166-179.
    11. Isin Ceti̇n, 2017. "Accounting Requirements And Records On Bank Subscribed Capital Compliance With European Directives," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 52-68, February.
    12. Jean-Michel Sahuta & Sandrine Boulerne & Medhi Mili & Frédéric Teulon, 2014. "What Relation Exists Between Corporate Social Responsibility (Csr) And Longevity Of Firms?," Working Papers 2014-248, Department of Research, Ipag Business School.
    13. Alba Rocio Gutierrez Garzon & Pete Bettinger & Jacek Siry & Bin Mei & Jesse Abrams, 2019. "The Terms Foresters and Planners in the United States Use to Infer Sustainability in Forest Management Plans: A Survey Analysis," Sustainability, MDPI, vol. 12(1), pages 1-20, December.
    14. Shehu Folaranmi Gbolahan Yusuf & Oluwabunmi Oluwaseun Popoola & Lindokhule Gwala & Thinandavha Nesengani, 2021. "Promoting University–Community Alliances in the Experiential Learning Activities of Agricultural Extension Postgraduate Students at the University of Fort Hare, South Africa," Sustainability, MDPI, vol. 13(18), pages 1-18, September.
    15. Filipa Correia & Philipp Erfruth & Julie Bryhn, 2018. "The 2030 Agenda: The roadmap to GlobALLizaton," Working Papers 156, United Nations, Department of Economics and Social Affairs.
    16. Choy Yee Keong, 2005. "Sustainable Development—An Institutional Enclave (with Special Reference to the Bakun Dam–Induced Development Strategy in Malaysia)," Journal of Economic Issues, Taylor & Francis Journals, vol. 39(4), pages 951-971, December.
    17. Anthony Bennett, 1998. "Sustainable public/private partnerships for public service delivery," Natural Resources Forum, Blackwell Publishing, vol. 22(3), pages 193-199, August.
    18. Smith, Joyotee & Scherr, Sara J., 2003. "Capturing the Value of Forest Carbon for Local Livelihoods," World Development, Elsevier, vol. 31(12), pages 2143-2160, December.
    19. Buys, Piet & Chomitz, Ken & Dasgupta, Susmita & Deichmann, Uwe & Larsen, Bjorn & Meisner, Craig & Nygard, Jostein & Pandey, Kiran & Pinnoi, Nat & Wheeler, David, 2006. "The economics of decentralized poverty-environment programs: An application for Lao PDR," Journal of Policy Modeling, Elsevier, vol. 28(7), pages 811-824, October.
    20. Lisa Knoche, 2014. "Nachhaltigkeit in Unternehmen und Organisationen - Umweltmanagementsysteme als Instrument zur ökologischen Prägung der Organisationskultur," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 67(17), pages 29-37, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jbuset:v:119:y:2014:i:3:p:365-380. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.