Moral obligations to third parties required by fiduciary duties to principals: a reflection through shareholder primacy

At the heart of the traditional notion of corporate governance is the idea that there are certain individuals (agents or trustees) who are supposed to manage an organization on behalf of others (principals or beneficiaries). The main responsibility of the former is to pursue the interests of the latter. However, because they have focused their attention too narrowly on how the interests of the principals should be promoted by agents, corporate governance scholars have failed to emphasize (and sometimes even recognize) that agents are not only meant to promote the interest of principals, but they are also required to fulfill many of their moral obligations. In this chapter, I offer a general framework to identify the obligations that bind managers who are acting on behalf of shareholders. I show that to properly identify these obligations, the distinction between duties that afford latitude and discretion is critical.