Corporate board directors have a fiduciary duty to act in
the shareholders’ financial interest. What if a board’s directors think they
know better that the stockholders as to their interest? In such a case, the
directors would be acting like elected representatives who vote contrary to the
wishes of their constituents for their own good. While valid from the
standpoint of representative democracy, I’m not sure the principle has
legitimacy in the corporate context, wherein property-rights are being
represented. Simply put, an owner gets to decide how his or her wealth is used,
within legal parameters of course. The case of Bank of America’s board may
suggest that directors essentially work for their managements while being shamelessly
dismissive of even binding directives from the stockholders as a group.
The complete essay is at “Corporate
Governance at Bank of America.”
The man of the hour. Brian Moynihan, Chair and CEO of Bank of America as of 2015. His power exceeded even that of the stockholders, whose concentrated wealth he managed. Lest it be maintained that a CEO with such power optimizes corporate earnings, consider that his predecessor, Ken Lewis, had the bank purchase Countrywide, whose fraudulent mortgages played a vital role in bringing about the financial crisis of 2008. Perhaps CEO/chair duality is of value simply in reducing a corporation's systemic risk. Hence, Congress may legitimately intervene.(Simon Dawson/Getty Images)
