Research Handbook on Fiduciary Law
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Research Handbook on Fiduciary Law

Edited by D. G. Smith and Andrew S. Gold

The Research Handbook on Fiduciary Law offers specially commissioned chapters written by leading scholars and covers a wide range of important topics in fiduciary law. Topical contributions discuss: various fiduciary relationships; the duty of loyalty and other fiduciary obligations; fiduciary remedies; the role of equity; the role of trust; international and comparative perspectives; and public fiduciary law. This Research Handbook will be of interest to readers concerned with both theory and practice, as it incorporates significant new insights and developments in the field.
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Chapter 12: Structural bias, R.I.P.?

Claire A. Hill and Brett H. McDonnell

Abstract

Structural bias has traditionally been a significant obstacle to adequate director monitoring. For a period of time early this century, the development of a fiduciary duty of good faith suggested that the Delaware courts were becoming serious about addressing structural bias, something we celebrated in previous work. In this chapter, after reviewing the concept of structural bias, we consider how Delaware’s corporate fiduciary duty law has evolved relevant to the concept. We find that recent case law calls into question how much force the duty of good faith has to address structural bias. That may be a serious problem, or it may not. Fiduciary duty law is not the only way to address structural bias. Other legal and non-legal mechanisms may address the problems that structural bias creates, and those mechanisms have evolved significantly. We ask whether other developments in this century have affected whether directors will be subject to structural bias, and whether, if they are so subject, they will be able to act on it. These developments include: the well-known monitoring failures at Enron, WorldCom, and Adelphia, proxy access, say on pay, independent director requirements, increasing diversity on boards, the increasing role of government in monitoring companies when Deferred and Non-Prosecution Agreements are entered into, and the rise of economic activism by hedge funds and corporate social responsibility. We conclude by pondering (inconclusively) what all of this may entail for future development of corporate fiduciary duties.

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