Natural Law and the Fiduciary Duties of Business Managers

Recent business scandals have focused attention on failures of corporate governance involving serious breaches of traditional legal and ethical standards on the part of those who manage corporate affairs. This article argues that the legal standards applicable to managerial behavior are traceable to deeply rooted moral standards that are the basis of the "fiduciary principle"; that the fiduciary principle is a principle of natural law that has been incorporated into the Anglo-American legal tradition; and that this principle underlies the duties of good faith, loyalty, and care that apply to corporate directors and officers. The fiduciary duties of corporate managers run to shareholders and not to creditors, employees, and other "stakeholders." This article further argues that corporate directors cannot eliminate their fiduciary obligation by contract. Enforcement by the courts of longstanding fiduciary standards of conduct is a better solution to problems of corporate governance than increased government regulation.