Delaware law requires directors of a corporation to strive in good faith and on an informed basis to maximize the value of the corporation for the benefit of all of its stockholders, and not to prefer the interests of stockholders with contract rights or preferences. Consequently, where the interests of stockholders diverge from the contracts rights of other stockholders, directors and controlling stockholders may breach their fiduciary duty of loyalty by exploiting or opportunistically favoring their contract rights over the interests of the stockholders as a whole.

This potential conflict of interest is exacerbated by directors appointed by and beholden to constituent stockholders, which often creates a dual-fiduciary problem, for which Delaware law does not provide a safe harbor. In short, directors beholden to constituent stockholders may subordinate their judgment for the corporation and all of its stockholders in favor of the contract interests of the constituent stockholders. Constituency directors, who act to benefit constituent stockholders at the expense of the interests of the corporation and its stockholders as a whole, are subject to a claim for breach of their fiduciary duty of loyalty, including the duty of good faith, which is a component of the duty of loyalty under Delaware law.

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