Rational investors diversify. Thus, most commentators have naturally assumed that fiduciary duty should be construed as if owed to a diversified stockholder. Thus, in practice, management duty should be seen as owed to the corporation but not necessarily to the stockholders. Ironically, management is the one constituency that identifies most with the fortunes of the corporation as an entity. A diversified stockholder can afford to win some and lose some.
Management stands to lose the most if the corporation fails.
After all, if such strategies lead to the ruin of the company, it is management that is left holding the bag. When outside counsel serves as a director of a corporation or other entity for which the lawyer also acts as legal counsel, many thorny issues may arise. Dual service may be difficult to refuse and difficult to perform. One Year Later. Jr. Small businesses are a vital part of our economy, accounting, depending on one's definition, for perhaps forty percent of the business activities in this country.