Debunking the Corporate Fiduciary Myth

[Alces]

Debunking the Corporate Fiduciary Myth

Kelli A. Alces
Florida State University - College of Law


March, 03 2009


Abstract:
Corporate governance law is based on the premise that directors and officers are fiduciaries of the corporation. Scholars and courts have grappled with how best to define and enforce corporate fiduciary duties. Those efforts have resulted in the atrophy of corporate fiduciary duties to the point of obsolescence. This paper challenges the basic fiduciary premise of corporate governance law and reveals that the relationship between corporate managers and their respective firms is not a fiduciary one. Rather, the relationship among directors, officers, and corporations is one governed by narrow, judicially enforced standards that no longer resemble fiduciary obligations. Recognizing that the nature of the corporate governance relationships has changed dramatically and has moved to a post-fiduciary regime is an important first step in reshaping corporate governance to better fit the difficult times it now confronts. After debunking the corporate fiduciary myth, the article presents a new vision of corporate governance, one that is rooted in contractually-based disciplinary regimes that bind corporate managers, a more effective and efficient approach to regulating corporate governance.

papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1352595_code466714.pdf?abstractid=1352595&mirid=1

[alanbond]

How Many Fiduciary Duties Are There in Corporate Law?

Julian Velasco
University of Notre Dame


2009

Notre Dame Legal Studies Paper No. 09-35

Abstract:
Historically, there were two main fiduciary duties in corporate law, care and loyalty, and only the duty of loyalty was likely to lead to liability. In the 1980s and 1990s, the Delaware Supreme Court breathed life into the duty of care, created a number of intermediate standards of review, elevated the duty of good faith to equal standing with care and loyalty, and announced a unified test for review of breaches of fiduciary duty. The law, which once seemed so straightforward, suddenly became elaborate and complex. In 2006, in the case of Stone v. Ritter, the Delaware Supreme Court rejected the triadic formulation and declared that good faith was a component of the duty of loyalty. In this and other respects, Delaware seems to be returning to a bifurcated understanding of the law of fiduciary duties. I believe that this is a mistake. The law is inherently complex and much too important to be oversimplified.

The current academic debate on the issue focuses on whether there should be two duties or three. In this article, I argue that the question is misleading and irrelevant, but that if it must be asked, the best answer is that there are five duties - one for each paradigm of enforcement. In defending this claim, I explain the true nature of fiduciary duties and provide a robust framework for the discussion, implementation, and development of the law.

papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1457804_code1212987.pdf?abstractid=1462751&mirid=1