Question

When Facebook went public, its disclosure document read:

As a board member and officer, Mr. Zuckerberg owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders. As a stockholder, even a controlling stockholder, Mr. Zuckerberg is entitled to vote his shares in his own interests, which may not always be in the interests of our stockholders.

Should corporate laws permit Zuckerberg to control the company without a duty to act in the best interests of the other shareholders?

Answer 1

Yes, Zuckerberg should be permitted the control of the company. 

Because there already exists a duty called fiduciary duty that the Zuckerberg is vested with. A fiduciary duty is when the promoter (Zuckerberg in this case) must seek what is in the best interests of the corporation and its shareholders as such a duty is a duty to corporation and its shareholders. And Zuckerberg, if encounters a situation, where his interests contrast with that of his shareholders, he must look beyond his own interests and act upon the interests of the shareholders. Yes, Mr. Zuckerberg owns shares in the company but in that case he\'ll have to follow SEC Laws and must disclose all the information to public before selling shares which means even if he works in the interest of himself heck can\'t make secret profits on the account of advantage he has as a promoter.

 

There are actually two fiduciary duties :

1. Disclosure of information

2. Acting in interest and not making secret profits.

 

Zuckerberg should be permitted to control the company, because it is his legal fiduciary responsibility to act as mentioned above. If he doesn\'t, he can be held liable for losses and charged for profits made secretly.

Zuckerberg should be permitted to control the company, because it is his legal fiduciary responsibility to act as mentioned above. If he doesn\'t, he can be held liable for losses and charged for profits made secretly.