Research Handbook on the History of Corporate and Company Law
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Research Handbook on the History of Corporate and Company Law

Edited by Harwell Wells

Understanding the corporation means understanding its legal framework, but until recently the origins and evolution of corporate law have received relatively little attention. The topical chapters featured in this Research Handbook, contributed by leading scholars from around the world, examine the historical development of corporation and business organization law in the Americas, Europe, and Asia from the ancient world to modern times, providing an invaluable resource for both further historical research and scholars seeking the origins of present-day issues.
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Chapter 19: Legitimating power: a brief history of modern U.S. corporate law

Dalia T. Mitchell

Abstract

Chapter 19 follows the development of US corporate law across the twentieth century via the thread of fiduciary duties. At the beginning of the century, it shows, corporate directors were held to high legal standards, regarded by the law as trustees for shareholders (and, briefly, for the community as well)—an approach to fiduciary duties she attributes to widespread fears of corporate overreach. Over the century’s course, however, as fears of corporate power receded, judges and legal scholars lowered the standard. By mid-century directors were seen not as trustees for shareholders but as their representatives, and by the end of the century directors were regarded as agents for largely passive shareholders. At each step directors’ fiduciary mandates shrank, so that, by the twenty-first century, all that was required of directors was that they followed certain procedures and did not act in subjectively bad faith. Shareholders seeking protection were to look not to the law but to the markets. Here the history of modern US corporate law is a history of failure to protect shareholders and society.

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