Under corporate law, fiduciaries (such as directors or executives) have a duty to act in the best interest of a firm's shareholders. This usually takes the form of increasing share value or the payout of dividends (and implicit in this argument is that the best interest of shareholders is the improved return on their initial investment).

However, what if it is the will of shareholders for the firm to engage in activity that apparently goes against their interests? I imagine this is prevalent in group situations, where transfer pricing possibly allows the parent transferee to enjoy suppressed prices charged by its subsidiary transferor.

In general, my question is: does corporate law uphold shareholder will or interest?

  • Consider designating which jurisdiction you are seeking information in/from. If it's Australia, you may have an answer already posted. If it's the USA, you don't.
    – A.fm.
    Jan 31, 2020 at 20:33

1 Answer 1



You have the duty wrong. Directors have a duty to act in the best interests of the company - not the shareholders as a whole or any subset of them. For example, from s181 of the Corporations Act 2001:

(1) A director or other officer of a corporation must exercise their powers and discharge their duties:

(a) in good faith in the best interests of the corporation; and

(b) for a proper purpose.

The corporation is a separate legal entity from its shareholders and a director is required to exercise their power "in the best interests of the corporation".

In general, the interests of the shareholders and of the corporation align, particularly if there is only one shareholder. However, where they don't a director must act for the corporation. The power of the shareholders is generally limited to appointing and removing directors: not controlling what they do while they are directors.

Of course, "best interest" is a pretty broad target to aim at.

  • There is such a thing as a "public benefit corporation" that envisions the best interests of the company more broadly than in a typical for profit company, however, to expressly authorize the kind of conduct imagined in the question.
    – ohwilleke
    Mar 3, 2020 at 1:41

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