The duty of loyalty is often called the cardinal principle of fiduciary relationships, but is particularly strict in the law of trusts.
It generally prohibits a trustee from engaging in transactions that might involve self-dealing or even an appearance of conflict of interest.
The Duty of Loyalty mandates that “[the officers and directors] must put the interests of the company before their own personal interests.”[4] It is then important to define what the corporation's / company's interests are in a legal context to evaluate whether the Duty of Loyalty is being breached.
The concept of shareholder primacy first emerged with the decision of Dodge V. Ford, which stated in its court opinion that a corporation exists “primarily for the profit of the stockholders.”[5] Since then, it has been emphasized in Ebay V. Newmark, where the so - called Unocal test was used.
The language “the Duty of Loyalty therefore mandates that directors maximize the value of the corporation over the long-term for the benefit of the providers of equity capital”[8] is used within a Trados Incorporated Shareholder Litigation court opinion.