Abstract

In the canonical view of the corporation, management is the agent of the owners of the corporation-the stockholders-and, as such, has a fiduciary duty to manage the corporation in their best interests. Most business ethicists condemn this arrangement as morally indefensible because it fails to respect the right of other corporate constituencies or “stakeholders” to self-deterrnination. By contrast, the modern agency theory of the firm provides a defense of this arrangement on the grounds that it is the result of stakeholders’ right to self-determination. This paper uses the exarnple of managers’ fiduciary duty to stockholders to argue that different normative judgrnents often mask empirical disagreements.