The Structure of the Fiduciary Relationship
Larry E. Ribstein (Deceased)
University of Illinois College of Law; PERC - Property and Environment Research Center
January 4, 2003
U Illinois Law & Economics Research Paper No. LE03-003
Fiduciary duties might be said to grow out of a variety of relationships involving one party's exercise of some measure of control. Fiduciary duties therefore are "structural" in the sense that they arise from the structure of the parties' relationship rather than from the parties' individual attributes, such as ignorance and lack of sophistication. This view of fiduciary duties is bound with the contractual nature of fiduciary duties. Moreover, this article shows that there are significant costs in extending fiduciary duties beyond the specific situation in which they are most appropriate - that involving clear separation of management powers and ownership. Extending fiduciary duties beyond this paradigm case increases litigation and contracting costs, decreases the effectiveness of owners' governance rights, and dilutes true fiduciaries' legal and extralegal incentives.
Number of Pages in PDF File: 46
Keywords: Fiduciary duties, theory of the firm, norms
JEL Classification: G3, K2
Date posted: April 23, 2003
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