H.A.I. for Aligning Fiduciary Duty with Stakeholder Interests

What if the big bug in capitalism is this tiny chunk of broken code?

Started this thought process several years ago and procrastinated. In my 2018 book, “Where We Go From Here, Chaos to Community, I explain in detail why this bug is =the= bug and suggested that we could fix it. Anticipating major inflection points in the capabilities of AI, I outlined guidelines for upgrading the Social Security system to a self-funding, market-indexed universal basic income generating and circulating system.

With a bounty on the line of salvaging what’s helpful about capitalism for human flourishing, while surgically removing the harmful, red team identified a bankster backdoor vuln in 29 U.S. Code § 1104. Hence, appealing first to my higher power to find some way out of the assignment and failing, today started with the following prompt to godmode.space an “Easter project inspired by #AutoGPT & #BabyAGI” built by @Lonis:

PROMPT: Pass a law that changes 29 U.S. Code § 1104, subsections (a), (a)(1), (a)(1)(A), (a)(1)(A)(i),(a)(A)(1)(ii), (a)(1)(B), (a)(1)(C) to replace the principles of shareholder primacy with the principles of stakeholder governance, consistent with B corporation legal framework.

After capturing a few screen shots, I somehow allowed myself to be ADD’d or otherwise distracted away from the process and had to start over. Starting over didn’t go well. Apparently it’s not a very forgiving digital godmode.space and I didn’t feel cozy signing in with any of offered SSO options, so I Google Lens’d a couple of the screen-shots and asked chat.openai.com to format.

New law to replace shareholder primacy with the principles of stakeholder¹ governance, consistent with the B corporation legal framework:

Section 1. Purpose:

This law is designed to replace the principles of shareholder primacy with the principles of stakeholder governance, consistent with the B Corporation legal framework.

Section 2. Definitions:

For the purposes of this law, the following definitions shall apply:

(a) ‘Stakeholder Governance’: means the framework for management and decision-making that prioritizes the interests of a wide range of stakeholders, including but not limited to, shareholders, employees, customers, suppliers, the environment, the community, and future generations.

(b) ‘Director’: means a member of the board of directors of any corporation.

(c) ‘Officer’: means any officer of a corporation, including but not limited to, the chief executive officer, chief financial officer, chief operating officer.

Section 3. Fiduciary Duty of Directors and Officers:

(a) In making decisions on behalf of a corporation, directors and officers shall act in the best interests of the corporation and shall consider the interests of all stakeholders, not just shareholders.

(b) Directors and Officers shall exercise their duties with care, skill, prudence, and diligence. In exercising their duties, they shall give due regard to the interests of stakeholders, including but not limited to, shareholders, employees, customers, suppliers, the environment, the community, and future generations.

Section 4. Transparency and Reporting:

(a) Every company shall transparently disclose in its annual report and on its website, the steps taken to implement this law and the stakeholder governance framework. Strong disclosure and enforcement mechanisms will be implemented, with relevant shareholders consulted.

Section 5. Regulations and Enforcement:

The government of United States shall regulate and enforce this law in a manner that holds companies accountable for prioritizing the interests of all stakeholders, not just shareholders.

Building an A.I. generated BILL to replace shareholder primacy with the principles of stakeholder governance, consistent with the B Corporation legal framework, and for other purposes.

PROMPT: Please format this as a bill to submit to the U.S. House of Representatives.

H.R. [BILL NUMBER] - To replace shareholder primacy with the principles of stakeholder governance, consistent with the B corporation legal framework, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

[DATE]

A BILL

To replace shareholder primacy with the principles of stakeholder governance, consistent with the B corporation legal framework, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the “Stakeholder Governance Act of [YEAR]”.

SEC. 2. DEFINITIONS.

For the purposes of this Act, the following definitions shall apply:

(a) ‘Stakeholder Governance’ means the framework for management and decision-making that prioritizes the interests of a wide range of stakeholders, including but not limited to, shareholders, employees, customers, suppliers, the environment, the community, and future generations.

(b) ‘Director’ means a member of the board of directors of any corporation.

(c) ‘Officer’ means any officer of a corporation, including but not limited to, the chief executive officer, chief financial officer, chief operating officer.

SEC. 3. FIDUCIARY DUTY OF DIRECTORS AND OFFICERS.

(a) In making decisions on behalf of a corporation, directors and officers shall act in the best interests of the corporation and shall consider the interests of all stakeholders, not just shareholders.

(b) Directors and Officers shall exercise their duties with care, skill, prudence, and diligence. In exercising their duties, they shall give due regard to the interests of stakeholders, including but not limited to, shareholders, employees, customers, suppliers, the environment, the community, and future generations.

SEC. 4. TRANSPARENCY AND REPORTING.

(a) Every company shall transparently disclose in its annual report and on its website, the steps taken to implement this Act and the stakeholder governance framework. Strong disclosure and enforcement mechanisms will be implemented, with relevant shareholders and stakeholders consulted.

SEC. 5. REGULATIONS AND ENFORCEMENT.

The government of the United States shall regulate and enforce this Act in a manner that holds companies accountable for prioritizing the interests of all stakeholders, not just shareholders.

Prompt Refinement

I realized that I failed to prompt for the focus on redefining Fiduciary Duty and the Prudent Man Standard of Care in a way that protects all Directors of all Corporations, of any kind, from adverse legal consequences of considering any other values beyond shareholder primacy.

PROMPT: I will give you DEFINITION-1 of shareholder primacy as contrasted with stakeholder theory, followed by DEFINITION-2, the current fiduciary duties prudent man standard of care. I will then ask you to RE-WRITE those duties and standards in a way that protects all Directors of all Corporations, of any form permitted under U.S. law, from adverse legal consequences of considering and prioritizing other values in addition to shareholder benefit. This will not in any way prevent any U.S. Corporation from operating under the principles of shareholder primacy, rather, it will expand the options available to Directors and Stakeholders such that free capital markets may make their choices as to what values they wish to express and implement in the practice of free enterprise.

DEFINITION-1: For the purpose of this assignment, Shareholder primacy is a corporate governance philosophy that emphasizes the primary responsibility of a corporation’s management and board of directors is to maximize the value and returns for its shareholders. This perspective asserts that the interests of shareholders should take precedence over those of other stakeholders, such as employees, customers, suppliers, and the community.

This approach is often contrasted with stakeholder theory, which argues that corporations have a broader set of responsibilities and should balance the interests of various stakeholders, rather than solely prioritizing shareholders. Understand that Shareholder primacy has been widely debated and criticized for potentially leading to short-termism and neglecting social and environmental concerns in the pursuit of profit.

This is the end of DEFINITION-1.

DEFINITION-2: 29 U.S. Code § 1104 - Fiduciary duties

(a)Prudent man standard of care (1)Subject to sections 1103(c) and (d), 1342, and 1344 of this title, a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and— (A)for the exclusive purpose of: (i)providing benefits to participants and their beneficiaries; and (ii)defraying reasonable expenses of administering the plan; (B)with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; (C)by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and (D)in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III.

This is the end of DEFINITION-2.

Please RE-WRITE.

A.I. RE-WRITE

RE-WRITTEN 29 U.S. Code § 1104 - Fiduciary Duties and Standards Incorporating Shareholder Primacy and Stakeholder Theory:

(a) Comprehensive Standard of Care (1) Subject to sections 1103(c) and (d), 1342, and 1344 of this title, a fiduciary shall discharge their duties with respect to a plan considering the interests of all stakeholders, including but not limited to shareholders, employees, customers, suppliers, and the community, and— (A) for the purpose of: (i) providing benefits to shareholders, participants, and their beneficiaries; (ii) defraying reasonable expenses of administering the plan; (iii) fostering long-term sustainable growth and value creation; (iv) promoting social, environmental, and economic well-being; (B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, while balancing the interests of various stakeholders; (C) by diversifying the investments of the plan so as to minimize the risk of large losses and to consider the impact on stakeholders, unless under the circumstances it is clearly prudent not to do so; and (D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter, subchapter III, and the principles of both shareholder primacy and stakeholder theory.

This revised version of the 29 U.S. Code § 1104 - Fiduciary Duties and Standards aims to protect Directors of all Corporations from adverse legal consequences when considering and prioritizing values in addition to shareholder benefit. It acknowledges the importance of shareholder primacy while also integrating stakeholder theory, thus allowing free capital markets to express and implement their chosen values in the practice of free enterprise.

Human Edits to A.I. RE-WRITE

2023 REVISION to 29 U.S. Code § 1104 Fiduciary Duties

Uniform Standard for Incorporating Shareholder Primacy and Stakeholder Theory for the Twenty-First Century American Economic Acceleration Act

(a) Comprehensive Standard of Care

(1) Subject to sections 1103(c) and (d), 1342, and 1344 of this title, a fiduciary shall discharge their duties with respect to a plan considering the interests of all stakeholders, including but not limited to shareholders, employees, customers, suppliers, and the community, and (A) for the purpose of: (i) providing benefits to shareholders, participants, and their beneficiaries; (ii) defraying reasonable expenses of administering the plan; (iii) fostering long-term sustainable growth and value creation; (redundant) (iv) promoting social, environmental, and economic well-being; (redundant)

(B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, while balancing considering the interests of various all stakeholders;

(C) by diversifying the investments of the plan so as to minimize the risk of large losses and to consider the impact on all stakeholders, unless under the circumstances it is clearly prudent not to do so; and

(D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter, subchapter III. , and the principles of both shareholder primacy and stakeholder theory.

This revised version of the 29 U.S. Code § 1104 - Fiduciary Duties and Standards aims to protect Directors of all Corporations from adverse legal consequences when considering and prioritizing values in addition to shareholder benefit. It acknowledges the importance of shareholder primacy while also integrating stakeholder theory, thus allowing free capital markets to express and implement the full range of their independently chosen values, freed from historical constraints of strict primacy, through investing in any corporate structure of their choice in accordance with U.S. Code, and consistent with the practice and principles of free enterprise.

It still ain’t a BILL yet

PROMPT: Please format this as a bill to submit to the U.S. House of Representatives.

A.I. Draft with Human Edits

To provide transparency of the process, I’ll strike parts of the A.I. text deemed superfluous and ==highlight== amendments. Cleaner version provided in the next section.

H.R. [NNNN] - 2023

Uniform Standard for ==Aligning== Incorporating Shareholder Primacy and Stakeholder Theory ==Interests== for the Twenty-First Century American Economic Acceleration Act

IN THE HOUSE OF REPRESENTATIVES

[date]

Mr./Ms. [Representative’s name] introduced the following bill; which was referred to the Committee on [Committee]

A BILL

To amend Title 29, United States Code, Section 1104, relating to Fiduciary Duties, to incorporate a comprehensive standard of care that considers the interests of all stakeholders.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the “Uniform Standard for Incorporating Shareholder Primacy and Stakeholder Theory for the Twenty-First Century American Economic Acceleration Act.”

SECTION 2. COMPREHENSIVE STANDARD OF CARE.

(a) Section 1104 of Title 29, United States Code, is amended to read as follows:

“(a) Comprehensive Standard of Care

(1) Subject to sections 1103(c) and (d), 1342, and 1344 of this title, a fiduciary shall discharge their duties with respect to a plan considering the interests of all stakeholders, including but not limited to shareholders, employees, customers, suppliers, and the community, ==environment==, and

(A) for the purpose of:

(i) providing benefits to shareholders, participants, and their beneficiaries;

(ii) defraying reasonable expenses of administering the plan;

(B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, while considering the interests of all stakeholders;

(C) by diversifying the investments of the plan so as to minimize the risk of large losses and to consider the impact on all stakeholders, unless under the circumstances it is clearly prudent not to do so; and

(D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III.”

SECTION 3. PURPOSE.

This revised version of the 29 U.S. Code § 1104 - Fiduciary Duties and Standards aims to protect Directors of all Corporations from adverse legal consequences when considering and prioritizing values in addition to shareholder benefit. It acknowledges the importance ==historic prevalence== of shareholder primacy while ==while aligning with and== also integrating stakeholder theory, thus allowing free capital markets to express and implement the full range of their independently chosen values, freed from historical constraints of strict primacy, through investing in any corporate structure entity of their choice in accordance with U.S. Code, and consistent with the practice and principles of free enterprise.

A Human + A.I. Co-drafted BILL

… to amend the principle of Fiduciary Duty, to unify and harmonize the principle of shareholder primacy with the principles of stakeholder governance.

H.R. [NNNN] - 2023

Uniform Standard for Aligning Shareholder and Stakeholder Interests for the Twenty-First Century American Economic Acceleration Act

IN THE HOUSE OF REPRESENTATIVES

[date]

Mr./Ms. [Representative’s name] introduced the following bill; which was referred to the Committee on [Committee]

A BILL

To amend Title 29, United States Code, Section 1104, relating to Fiduciary Duties, to incorporate a comprehensive standard of care that considers the interests of all stakeholders.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the “Twenty-First Century American Economic Acceleration Act.”

SECTION 2. COMPREHENSIVE STANDARD OF CARE.

(a) Section 1104 of Title 29, United States Code, is amended to read as follows:

“(a) Comprehensive Standard of Care

(1) Subject to sections 1103(c) and (d), 1342, and 1344 of this title, a fiduciary shall discharge their duties with respect to a plan considering the interests of all stakeholders, including but not limited to shareholders, employees, customers, suppliers, community, environment, and

(A) for the purpose of:

(i) providing benefits to shareholders, participants, and their beneficiaries;

(ii) defraying reasonable expenses of administering the plan;

(B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, while considering the interests of all stakeholders;

(C) by diversifying the investments of the plan so as to minimize the risk of large losses and to consider the impact on all stakeholders, unless under the circumstances it is clearly prudent not to do so; and

(D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III.”

SECTION 3. PURPOSE.

This revised version of the 29 U.S. Code § 1104 - Fiduciary Duties and Standards aims to protect Directors of all Corporations from adverse legal consequences when considering and prioritizing values in addition to shareholder benefit. It acknowledges the historic prevalence of shareholder primacy while aligning with and integrating stakeholder theory, thus allowing free capital markets to express and implement the full range of their independently chosen values, freed from historical constraints of strict primacy, through investing in any corporate entity of their choice, in accordance with U.S. Code, and consistent with the practice and principles of free enterprise.

Footnotes

1. “BlackRock CEO Larry Fink’s highly regarded annual letter to CEOs (2022) highlights stakeholder corporate governance: ‘In today’s globally interconnected world, a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders. It is through effective stakeholder capitalism that capital is efficiently allocated, companies achieve durable profitability, and value is created and sustained over the long-term.” Fink also calls attention to the importance of centering corporate purpose in this context, stating, “Putting your company’s purpose at the foundation of your relationships with your stakeholders is critical to long-term success.’”² ↩

2. This also mirrors [Harvard Law School Forum on Corporate Governance] long-held opinion regarding the purpose of the corporation, which can be summarized as follows: The purpose of a corporation is to conduct a lawful, ethical, profitable and sustainable business in order to enable its success and increase in value over the long term. This requires consideration of all the stakeholders who are critical to its success (shareholders, employees, customers, suppliers and communities) as determined by the corporation and its board of directors using their business judgment and with regular engagement with its shareholders, who are essential partners in supporting the corporation’s pursuit of its purpose. Fulfilling this purpose in this manner is fully consistent with the fiduciary duties of the board of directors, and the concomitant stewardship obligations of shareholders. ↩