Roberto Tallarita has posted “Fiduciary Deadlock” on SSRN (here). Below is the abstract.

In May 2022, the shareholders of BlackRock, the world’s largest asset manager, voted on a proposal to push portfolio companies to reduce their social and environmental externalities, even if doing so would reduce the companies’ stock value. The proposal was based on the theory that BlackRock should maximize the value of its whole portfolio (portfolio primacy), rather than the value of individual companies (shareholder primacy), and it is driven by the expectation that portfolio primacy can harness the power of large asset managers to fight climate change and other pressing social problems. Although the proposal was rejected, portfolio primacy is gaining increasing support and will likely inspire similar proposals in the next proxy seasons. In this Essay, using the BlackRock proposal as a paradigmatic case, I examine how portfolio primacy interacts with the fiduciary duties of large asset managers. I argue that portfolio primacy creates a fiduciary deadlock: a situation in which multiple fiduciary relationships—between investment adviser and fund investors, between corporate managers and shareholders, between controlling and minority shareholders—come into conflict with each other. I show that, within the existing structure of fiduciary law, portfolio primacy will remain trapped in a tight knot of conflicts and, as a result, will prove ineffective in promoting ambitious social and environmental goals. Only legislators and regulators can cut this Gordian knot.