Corporate Tax Avoidance and Honoring the Fiduciary Duties Owed to the Corporation and Its Stockholders


Corporate tax avoidance is a pressing issue of both national and international concern. In recent years, the tax strategies of Apple, Facebook, Pfizer, Starbucks, and numerous other corporations have reminded the public that firms regularly undertake highly aggressive tax strategies to minimize their corporate taxes. Corporations often claim that they are legally required to engage in these aggressive strategies. But this article proves that claim is utterly and completely incorrect when based upon the fiduciary duties owed to the corporation and its stockholders.

Directors and other corporate managers often look to the classic case of Dodge v. Ford, which is ubiquitous in corporate law from the classroom to the boardroom to the courtroom, as a North Star that guides them toward and defines their fiduciary duties to the corporation and its stockholders. In Dodge, the court held, “A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end.” This holding, which the authors of this article will refer to as the “Dodge mandate,” has been interpreted by many directors and other corporate managers not only as a decree to relentlessly seek profit, but as an absolute edict to maximize profits, even if it means hurting society, damaging the environment, or destroying anything standing in the corporation’s path.

The problem is that this interpretation of the Dodge mandate is wrong. This mandate requires only that directors and other corporate managers run the corporation “primarily for the profit of the stockholders,” which leaves room for other secondary considerations. Beyond that, many limitations on the Dodge mandate exist, including the business judgment rule, which gives directors and other corporate managers substantial discretion in running the corporation. The Dodge mandate, while offering general guidance as to how a corporation should be run, i.e. “primarily for the profit of the stockholders,” utterly fails to offer guidance in assessing any specific analysis. As a result, other doctrines are needed to resolve these issues. This article discusses some of the doctrines, including corporate social responsibility, sustainability, and economics, that should be employed to protect society from the damage that tax avoidance can create. It concludes that while some minimal amount of tax avoidance may be acceptable that very aggressive forms of tax avoidance should be avoided.

Currently, a gap exists in the tax law scholarship regarding the application of the fiduciary duties owed by directors and other corporate managers to tax avoidance strategies. While substantial legal and ethical literature exists exploring the metes and bounds of fiduciary duties in the corporate context, this literature has not been applied to questions of tax avoidance. This article fills that hole.


Tax, Avoidance, Fiduciary, Fiduciary Duty, Tax Avoidance, Dodge, Dodge v. Ford

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58 Boston College Law Review 1425 (2017)


COinS Eric C. Chaffee Faculty Bio