| The debate surrounding fiduciary duties owed to creditors by directors, especially in the vicinity of insolvency, has resurfaced in light of two court decisions in Canada and the United States.;The Modigliani-Miller theorem and the Fisher Separation theorem are used to demonstrate that, in order to maximize the value of the firm, the directors do not have to analyze the particular interests of various stakeholders. Pursuing the highest NPV projects effectively aligns the interests of the corporation with those of shareholders and creditors. Therefore, serving stakeholders' interests becomes the effect of, and not the scope of, fiduciary duties.;This paper contributes to the discussion by looking at the issue from a corporate finance perspective. Directors' fiduciary obligation to further the best interests of the corporation (by maximizing its value) requires them to select the projects that have the highest net present value. |
