User:Skkblaw/Duty of Loyalty

Legally Defining the Corporation's Interests
The Duty of Loyalty mandates that “[the officers and directors] must put the interests of the company before their own personal interests.” It is then important to define what the corporation's / company's interests are in a legal context to evaluate whether the Duty of Loyalty is being breached. A corporation's best interests have come to legally be defined as maximizing shareholder value over the long term. The concept of shareholder primacy first emerged with the decision of Dodge V. Ford, which stated in its court opinion that a corporation exists “primarily for the profit of the stockholders.” Since then, it has been emphasized in Ebay V. Newmark, where the so - called Unocal test was used. In this Unocal test, the language "proper corporate objectives" is used. In the court decision, the courts characterized proper corporate objectives solely as profit maximization. Specifically, profit maximization over the long term is the proper corporate objective. The language “the Duty of Loyalty therefore mandates that directors maximize the value of the corporation over the long-term for the benefit of the providers of equity capital” is used within a Trados Incorporated Shareholder Litigation court opinion. Acting in a corporation's interests is legally defined by acting to maximize shareholder profit in the long term, though how exactly that is done is often left to business judgement, per the Business judgement rule.