Does Directors Have Fiduciary Duties?

1287 Words6 Pages
Does directors have fiduciary duties to creditors? Shareholder primacy theory seems not support the viewpoint that shareholders owed exclusive fiduciary duties by directors, then, other constituencies like creditors, employees and suppliers, should directors owe fiduciary duties to them? Schwarcz indicates that when the company is insolvency or the company want to have some high risk ventures, the company can only rely on creditors’ money. On this occasion, creditors substitute for shareholders and become the residual claimant of the company. Hence, the following part will take creditors as an example, to illustrate that in some special situations, directors should take creditors’ interests into consideration through the contractarian approach. The main theory of contractarian approach is that all the people in the company are in the voluntary contract-based relationship. This kind of voluntary contract-based relationship entitled every parties of the contracts the rights to negotiate with each other and to reach an agreement to some specific items. This approach come up with two arguments to argue that creditors are unnecessary to owed fiduciary duties by directors, which are one, from the efficiency perspective, and another one is from the other protect mechanisms perspective. First, when it comes to the importance of efficiency, no one can describe better than the professor Gillian Hadfield, who said that efficiency is the “bedrock of gold ” of the capital market,
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