Edited by D. G. Smith and Andrew S. Gold
Chapter 6: Fiduciary law’s anti-corruption norm
This chapter examines an important feature of the Anglo-American common law of fiduciary obligation—what I have previously characterized as the “anti-corruption norm.” While this norm has been invoked in a variety of different contexts, the norm has broadly (albeit inconsistently) proscribed and punished the use of an entrusted position for self-regarding gain where the fiduciary has failed to disclose the gain to her beneficiary. The norm is animated by a concern that the fiduciary refrain from acting out of an illicit motive—that is, a motivation of self-enrichment—in contrast to the thoroughgoing devotion to the beneficiary’s interest reflected in the requirement of loyalty. As courts have occasionally articulated the concern, fiduciaries ought to avoid placing themselves in situations where there is a conflict between their duty and their self-interest, lest the temptation to disloyally exercise their duty-bound judgment proves too great to resist. This “temptation rationale” is suggestive of a traditional, moralistic understanding of corruption as a human failing and serves as the ethical and public policy basis for proscribing the use of an entrusted position for self-regarding gain in various contexts. This chapter argues that the range of improper conduct that could be associated with corruption, as signaled by reference to the temptation rationale, is quite broad. It reaches this conclusion by analyzing the invocation of the anti-corruption norm in the following contexts: (i) bribes and secret commissions; (ii) opportunities; (iii) renewals and reversions; and (iv) confidential information. These categories are neither mutually exclusive nor do they exhaust the myriad situations in which the anti-corruption norm has been employed. Due primarily to space limitations, this chapter excludes treatment of the classic self-dealing situations, where the fiduciary transacts directly with the beneficiary and thus appears on opposite sides of the same transaction—in both personal and fiduciary capacities.
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