How Weakening the Fiduciary Duty of Loyalty Affects Corporate Culture

Corporate culture binds employees together and directs their collective behavior at work. It also has an important impact on the success of organizations. Studying the determinants of corporate culture has been difficult, however, because of its unobservable nature. In a recent working paper, we investigate how the fiduciary duty of loyalty affects corporate culture in the U.S by using quantitative measures that Li et al. (2021) have developed with machine learning techniques. Our paper offers insights into the long-standing agency cost problem and the intra-firm balance between principles and freedom.

A fundamental tenet of corporate law, the fiduciary duty of … Read more