“Fiduciary duty” might not be the first phrase that comes to mind while watching news of the serial uprisings across the Middle East and North Africa, but there is a link. In Tunisia, Egypt, and Libya, leaders broke trust with their constituents by suppressing dissent, extracting personal gains, and entrenching ruling cliques. Then a spark—in Tunisia, it was a trove of WikiLeaks documents exposing corruption—combined with social media to fuel grassroots rebellion.
A similar (if more sedate) relationship of trust exists between corporate boards and shareowners. Corporate law captures that idea by identifying directors precisely as agents or fiduciaries—the term comes the Latin word for “trust”—of equity holders. If investor confidence in the board is in some way ruptured—say, by directors presiding over outsized pay for management underperformance—corporate boards could experience the capital markets equivalent of Tahrir Square.
