33. Fiduciary (definition)

NOTE: if you’re new to Ground-Up Governance, or are finding anything a bit strange or confusing, you might want to START HERE.

Although I’m a bit ashamed to admit it, I agonized a little bit over the placement of this word. You will soon learn that there is a tension in corporate governance between worrying about the tiniest details and dreaming about the hugest, most audacious possibilities. The word “fiduciary” sits WAAAY toward the tiny details end of the spectrum. It’s simultaneously both super incredibly important and EXTRA boring and uninspiring. As such, it is emblematic of a lot of misunderstood words in a typical book or article about corporate governance, which this isn’t!

Anyway, let’s start with the noun version of this word. A fiduciary is someone who’s been legally entrusted to look after someone else’s (let’s say Tyrone’s) interests – usually their financial interests. Fiduciaries have authority (to make decisions in Tyrone’s interests) and duty (to make decisions in Tyrone’s interests). The duty part is where the adjective form of this word usually comes into play: “fiduciary duty” just means the duty that comes with being a fiduciary.

In the context of corporate governance, fiduciaries can be REALLY important.  Think about the example of the corporation with 100,000,000 shareholders. Sure, all the shareholders get to vote on a few important things, but there’s a lot of stuff – from how and when to clean the floors to deciding if you should acquire your friend’s competing Billie Eilish hat line, Chapeaucean Eyes. Most shareholders don’t want to have to worry about any of that stuff. So, shareholders often collectively delegate some authority to one or more fiduciaries to make decisions on their behalf.