Table of Contents

Research Handbook on the Economics of Corporate Law

Research Handbook on the Economics of Corporate Law

Research Handbooks in Law and Economics series

Edited by Claire A. Hill and Brett H. McDonnell

Comprising essays specially commissioned for the volume, leading scholars who have shaped the field of corporate law and governance explore and critique developments in this vibrant and expanding area and offer possible directions for future research.

Chapter 8: Fiduciary Duties: The Emerging Jurisprudence

Claire A. Hill and Brett H. McDonnell

Subjects: economics and finance, law and economics, law - academic, company and insolvency law, corporate law and governance, law and economics


Claire A. Hill and Brett H. McDonnell 1. INTRODUCTION Fiduciary duties are at the heart of corporate law. Directors manage corporations, and officers do the day-to-day work; both are directed and constrained by the fiduciary duties they owe to their corporations and to shareholders (and perhaps other constituencies as well). In this chapter, we provide a brief overview of where fiduciary duty law has been, where it is now, and where we believe it is and should be going. A stylized version of fiduciary duty history carves the world into two types of duties: the duty of care and the duty of loyalty. The duty of care covers attentiveness; the duty of loyalty covers self-dealing. The former is a duty with few teeth, given that certificates of incorporation typically contain provisions relieving directors of liability for what would otherwise be breaches of the duty. Moreover, where decisions (or omissions) are at issue that might implicate the duty of care, courts are extremely deferential, in most cases declining to second-guess what directors and officers did. That being said, the duty of care remains enormously influential as a guide to and constraint on director and officer conduct. The duty of loyalty covers matters that appropriately invite significant scrutiny by courts – and carry a real risk of liability (Hill & McDonnell 2007a). But these two duties as classically articulated leave open a wide middle ground, where neither inattentiveness nor self-dealing is implicated, but director and officer conduct is not properly serving the interests it...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information