Fiduciary Duties & the Good Corporate Citizen

Sep 3, 2026 | Blog

Infographic showing how fiduciary duties in Canadian corporate law balance shareholder interests, stakeholders and long-term corporate success.

Written by Dimitar Tomovski, B.A. (Hons.), M.A., JD Candidate 2026

Introduction

To the layperson, the role of a corporation’s director is clear: make as much money for the corporation as possible without regard for the interests of any other party. Sure, a director’s actions may irreversibly pollute a lake, but if the shareholder’s pockets are filled, the director has fulfilled her duty. Thankfully, this notion does not actually capture the full scope of the fiduciary duties of directors. In this blog, I will address the distinction between the shareholder and stakeholder model of primacy in the decision-making of directors and explain how Canadian case law actually requires directors to take a holistic perspective when deliberating on corporate decisions. Additionally, I will show how this holistic perspective actually promotes the best interests of the corporation.

Surface-Level Troubles with Fiduciary Duties

Every second-year law student who has made it through their law school’s required corporations class will be familiar with the concept of fiduciary duties. As a requirement of proper corporate management, directors have a duty to act in the best interest of a corporation and owe a fiduciary duty first and foremost to the corporation. This seems to create rather troubling ethical consequences at first glance. It could theoretically be calculated that the best interest of the corporation is to move forward with a project that would introduce a greater social harm than if the project was not pursued. This raises the question: does a director still have a fiduciary obligation to pursue it? Two important cases—Peoples Department Stores Inc. (Trustee of) v. Wise and BCE Inc. v. 1976 Debentureholders—provide the insights and precedent for how these duties should be weighed and explain how to approach any conflict that weighs a director’s duty to society and her fiduciary duty to the corporation.

Peoples Department Stores Inc. (Trustee of) v. Wise

1. The SCC’s Decision

A 2004 Supreme Court decision, Peoples Department Stores Inc (Trustee of) v. Wise [Peoples], provided important insights on whether directors breach their fiduciary duty and duty of care to creditors under the Canadian Business Corporations Act (“CBCA”) when they implement flawed policies. In this case, the flawed policy was inventory-sharing, which contributed to the corporation’s insolvency.

1 In Peoples, the court recognized that s. 122(1)(a) of the CBCA imposed duties upon directors in relation to creditors but acknowledged in the introduction that the extent of those duties had to be determined.2 Here, the SCC determined that directors are protected from liability for honest, well-intentioned decisions that ultimately fail. This is a principle known as the “business judgment rule.”3 As long as the decision is not made for the benefit of the director or officer, or committed with an intention to harm the corporation, the act is not considered a breach of a director’s fiduciary duty.4

2. Goodbye to the “Traditional Notion”

Darcy MacPherson’s article, “The Supreme Court Restates Director’s Fiduciary Duty – A Comment on Peoples Department Stores v. Wise,” suggests that the decision in Peoples ultimately altered what was meant by “the best interests of the corporation” found in the CBCA.5 He then argues that the Supreme Court’s approach to adopting an “enlightened shareholder value” approach to management instead of a “pluralist” approach—i.e. the view that shareholder interests may sometimes be sacrificed under appropriate circumstances to serve other goals6—creates uncertainty in the law7 and notes that “[t]raditionally, despite the occasional judicial statement of a broader view, the weight of authority has held that the ‘best interests of the corporation’ were to be equated with the best interests of the shareholders collectively.”8 However, MacPherson argues that the decision in Peoples rejected this traditional notion of what is meant to act in a corporation’s best interest without clearly providing a replacement for the traditional notion.9

3. What if Not the “Traditional Notion”?

What MacPherson believes the court is suggesting in Peoples is that the director’s duties are not only towards the interests of shareholders, but also to the interests of “employees, suppliers, creditors, consumers, governments and the environment.”10 In this way, the decision in Peoples implies that directors have an obligation to create a “better” corporation by considering the interests of every relevant stakeholder and not favouring the interests of one over another.11

Despite this, MacPherson does not believe that this necessarily entails a pluralist view for ascribing fiduciary duties. He instead argues that an “enlightened shareholder value” approach can be taken which views constituencies other than shareholders as relevant, but which ought not to be considered if they undermine long-term shareholder value. In this way, he makes an argument in favour of and calls for the recognition of the importance of other constituencies insofar as doing so is the best way to promote the interests of shareholders.12

BCE Inc. v. 1976 Debentureholders

1. Fiduciary Duties and the CBCA

Before considering the current precedent for fiduciary duties, i.e. BCE Inc. v. 1976 Debentureholders, it is important to consider what the CBCA tells us about fiduciary duties in Canadian business law. Regarding the duty of care of directors and officers, 122(1)(a) of the CBCA states:

“Every director and officer of a corporation in exercising their powers and discharging their duties shall

“(a) act honestly and in good faith with a view to the best interests of the corporation[.]”13

This legislation reflects the ideals of Bell Canada Enterprises Inc. (“BCE Inc.”) by targeting the fiduciary duties of directors not at stakeholders, but at the corporation. To some, this idea may seem morally repugnant, if not dangerous. For example, can we blame an oil executive for enacting environmentally dangerous policies if she is merely pursuing her duty to grow the capital of the corporation at the expense of environmental stakeholders? BCE Inc. provides some thought-provoking keys for why this ought to be the case.

2. The Decision

A landmark case that clarified the fiduciary duties of corporate directors, BCE Inc. v. 1976 Debentureholders [BCE Inc.] is significant for clarifying how the CBCA legislates stakeholder interests and the oppression remedy. In this case, a group of financial institutions holding debentures issued by BCE Inc. opposed an implemented plan of arrangement agreed upon by BCE’s shareholders. The concern was that the short-term trading value of the debentures would suffer a significant loss of 20 percent.14 The Supreme Court ruled against the debentureholders and stated that the rights of the debentureholders were not fundamentally altered. It was a foreseeable risk that the trading value of the debentures could diminish, and BCE’s actions served a valid business purpose considering they were assisted by expert legal and financial advisors.15

The SCC decided:

“The fact that the conduct of the directors is often at the centre of oppression actions might seem to suggest that directors are under a direct duty to individual stakeholders who may be affected by a corporate decision. Directors, acting in the best interests of the corporation, may be obliged to consider the impact of their decisions on corporate stakeholders, such as the debentureholders in these appeals. This is what we mean when we speak of a director being required to act in the best interests of the corporation viewed as a good corporate citizen.”16

3. Who is this “Good Corporate Citizen”?

Scholars have noted that there is still a distinction between a fiduciary duty and the oppression remedy. While the oppression remedy aims to mitigate harm to stakeholders that may come from the oppressive act of a corporation or its directors, a fiduciary duty’s purpose is only to protect the interests of the corporation.17 J. Anthony Vanduzer notes that while the SCC identified that the fiduciary duty includes a duty to individual stakeholders with respect to being treated “equitably and fairly,” the duty seems to follow only insofar as it is in the best interests of the corporation.18

Concerns have also been raised about the concept of “good corporate citizenship” by the Supreme Court. Sarah P. Bradley writes that, “[s]ince corporations are not, in fact, citizens, and assessments of ‘goodness’ are not usually the subject of judicial determination, it would appear that the Court is attempting to suggest a contextual social standard, rather than a legally precise one.”19 However, she believes that it is a flawed analogy to insinuate that corporations will make good, responsible choices akin to those of a good human citizen considering humans themselves do not always have a legal duty to do good and be responsible.20

Implications and Consideration

The scholarship on where directors owe their duties since BCE Inc. has been fruitful to say the least. With Canadian law shifting from a shareholder-oriented conception of fiduciary duties to one that balances competing stakeholder interests, the question is just how significant it is to say that “[w]hen acting with a view to the best interests of the corporation, directors and officers ‘may’ consider the interests of stakeholders.”21 However, the fact that “may” is used instead of “should,” “shall,” or “must” seems to suggest that the consideration of other stakeholders is not mandatory.22

Camden Hutchison suggests that:

“During a change of control, directors contractually bind themselves from considering transactions that do not maximize shareholder value, regardless of stakeholder interests. This practice raises serious questions as to the relevance of fiduciary duties to non-shareholder constituencies. It also has broader implications for corporate social responsibility: Despite the formal allowances of Canadian law, structural economic factors make it exceedingly unlikely that directors meaningfully or consistently pursue corporate objectives other than profits.”23

Despite this, Stephen Viederman argues that, “[f]iduciary responsibility must acknowledge that economic reality must incorporate the social, environmental and financial into a single investment decision-making process if it is to maximize returns both for beneficiaries and the society as a whole.”24 If this is not done, any benefit will at best be a short-term one for a corporation.25 For this reason, fiduciaries must be knowledgeable in issues revolving around society, the environment, politics, and culture, and they ought to make sure investment strategies are not only financially viable, but also socially just and environmentally sound for the sake of “long-term sustainability and growth,” which “will carry less risk of liability and early failure.”26

Conclusion

The effects that Peoples and BCE Inc. have had on the perception of fiduciary duties in Canadian law through their insights on the balance between shareholder primacy and stakeholder theory have been as valuable as they have been controversial. While they have been pivotal in expanding the corporate governance model from shareholder primacy to stakeholder inclusivity, directors, courts, and academics must still be mindful when deliberating about the stakeholder approach and must consider carefully whether stakeholders can be meaningfully considered if the purpose of fiduciary duties is still to maximize returns for shareholders. Without doing this, the impacts can be detrimental not only to society, but can ironically have a negative impact on the long-term viability of the corporation itself. Reputation is important, and if a corporation is well-known for having no regard for environmental consequences, this can harm its reputation and the way the public perceives it. Conversely, if a corporation shows the public that it cares about environmental and social causes, there will be a boost to its reputation, leading to additional revenue and promoting shareholder value.

Citations

Cases

  • Peoples Department Stores Inc. (Trustee of) v. Wise, 2004 SCC 68 at para 47.
  • BCE Inc. v. 1976 Debentureholders, 2008 SCC 69 at para 4.

Articles

  • Sarah P. Bradley, “BCE Inc v 1976 Debentureholders: The New Fiduciary Duties of Fair Treatment Statutory Compliance and Good Corporate Citizenship?” (2009-10) 41 Ottawa L Rev 325
  • Camden Hutchison, “To Whom Are Director’s Duties Owed? Evidence from Canadian M&A Transactions” (2023) 68 McGill LJ 123
  • Darcy L. MacPherson, “The Supreme Court Restates Directors’ Fiduciary Duty – A Comment on Peoples Department Stores v. Wise” (2005) 43:2 Alberta L Rev 383 at 384
  • J. Anthony Vanduzer, “BCE v 1976 Debentureholders The Supreme Courts Hits and Misses in Its Most Important Corporate Law Decision Since Peoples” (2010) 43 UBC L Rev 205
  • Stephen Viederman, “New Directions in Fiduciary Responsibility” (2003) 5:6 J Pract Est Plan 21

Legislation

  • Canadian Business Corporations Act, RSC 1985, c C-44, s 122(a)(b)

Notes

  1. Peoples Department Stores Inc. (Trustee of) v. Wise, 2004 SCC 68 at para 47. ↩
  2. Ibid at para 2. ↩
  3. Ibid at para 64. ↩
  4. Ibid at para 35. ↩
  5. Darcy L. MacPherson, “The Supreme Court Restates Directors’ Fiduciary Duty – A Comment on Peoples Department Stores v. Wise” (2005) 43:2 Alberta L Rev 383 at 384. ↩
  6. Ibid at 393. ↩
  7. Ibid at 384. ↩
  8. Ibid at 386. ↩
  9. Ibid at 386. ↩
  10. Ibid at 392. ↩
  11. Ibid at 392. ↩
  12. Ibid at 397. ↩
  13. Canadian Business Corporations Act, RSC 1985, c C-44, s 122(a)(b) ↩
  14. BCE Inc. v. 1976 Debentureholders, 2008 SCC 69 at para 4. ↩
  15. J. Anthony Vanduzer, “BCE v 1976 Debentureholders The Supreme Courts Hits and Misses in Its Most Important Corporate Law Decision Since Peoples” (2010) 43 UBC L Rev 205at para 244. ↩
  16. Supra note 13 at para 66. ↩
  17. Supra note 14 at 213. ↩
  18. Ibid at 244. ↩
  19. Sarah P. Bradley, “BCE Inc v 1976 Debentureholders: The New Fiduciary Duties of Fair Treatment Statutory Compliance and Good Corporate Citizenship?” (2009-10) 41 Ottawa L Rev 325 at 345. ↩
  20. Ibid at 345. ↩
  21. Camden Hutchison, “To Whom Are Director’s Duties Owed? Evidence from Canadian M&A Transactions” (2023) 68 McGill LJ 123 at 133. ↩
  22. Ibid at 133-4. ↩
  23. Ibid at 147-8. ↩
  24. Stephen Viederman, “New Directions in Fiduciary Reponsibility” (2003) 5:6 J Pract Est Plan 21 at 22. ↩
  25. Ibid at 22. ↩
  26. Ibid at 54-55. ↩

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The views and opinions expressed in the blogs and case reporter are the views of their authors, and do not represent the views of the Desautels Centre for Private Enterprise and the Law, the Faculty of Law, or the University of Manitoba. Academic Members of the University of Manitoba are entitled to academic freedom in the context of a respectful working and learning environment.