[nybble41]

> You seem to have a misconception that fiduciary duty must be to shareholders.

Fiduciary duty for a public company is to the shareholders, by definition. The board and officers of the corporation serve as the agents of its owners, their principals, without whose investment the corporation would not exist. Of course there is usually some overlap between the shareholders and the employees, and the company has other kinds of duties toward its employees in the form of contracts as well as a less formal stake in employee retention and goodwill. If you want a co-op structure where the shareholders and the employees are one and the same, that sort of thing does exist and can sometimes work out reasonably well but there are some obvious trade-offs when it comes to raising capital. In particular you can't fund growth by selling equity, only by going into debt, which means the co-op and its shareholder-employees are taking on the lion's share of the risk if the venture should fail.

[nicoburns]

> Under the U.S. legal system, a fiduciary duty is a legal term describing the relationship between two parties that obligates one to act solely in the interest of the other

https://www.investopedia.com/ask/answers/042915/what-are-som...

As far as I'm aware fiduciary duty actually has a broad meaning as above. Of course under our current legal system, fiduciary duty is to shareholders. But there's no reason why we have to setup society like that.

Co-ops are a good way of organising things, but as you say they have downsides. But there are lots of in-betweens. For example, we could require that a proportion of the board (say 25%) are employees. The markets have shown that they are willing to invest a lot of moeny in companies like Facebook where preferential shares allow non-majority shareholders to retain control of the company.

[nybble41]

Going by your broader definition, then: If there are shareholders, and there is any kind of fiduciary duty at all, then it must be to the shareholders. The officers of the corporation cannot act solely in the interest of more than one master. If they must act solely in the interest of some other party with mostly opposing interests, such as the employees, then there will be no non-employee shareholders. It would defeat the point of holding an equity stake in the company.

The officers and board represent the shareholders because the shareholders own the company. The employees do not own the company. Their relationship to the company is transient at best; they have an ongoing and hopefully amicable relationship but no real stake in the company's future. Either side can terminate the employment contract at will with at most a few weeks' notice and some minor payout (or payback) of (un)accrued benefits. If a given employee wants to take an equity position in the company and obtain some influence and a portion of the profits they have only to purchase some shares, but in practice they would probably be better off investing that same money in a more diversified portfolio. I myself could hold a "democratic" share in my employer (market cap divided by number of employees) right now via my 401k if I put most or all of it in company stock, but I'd really rather not take that kind of risk.

[tonyarkles]

Everything you said is true, and at the same time misses an important nuance. Yes, your obligation is to maximize shareholder value, but there are an infinite number of ways to do that. Treating your employees like crap and paying them the minimum you can may temporarily maximize your returns for a quarter, but your hiring and training costs will rose as employee turnover goes up. “We treat our employees well because we believe that that maximizes our organization’s long term productivity and profitability“ is a perfectly reasonable approach to addressing your fiduciary duty to your shareholders.