Abstract

http://ssrn.com/abstract=902871
 
 

Footnotes (187)



 


 



In Search of a Higher Standard: Rethinking Fiduciary Duties of Directors of Wholly-Owned Subsidiaries


Stefan J. Padfield


University of Akron School of Law


Fordham Journal of Corporate and Financial Law, Vol. 10, p. 79, 2004
U of Akron Legal Studies Research Paper No. 06-16

Abstract:     
An important, yet undeveloped, area of corporate law concerns the fiduciary duties of wholly-owned subsidiary directors. The district court in First American Corp. v. Al-Nahyan, 17 F. Supp. 2d 10 (D.D.C. 1998), expressed the hope that this "perplexing issue" would become the subject of "a more robust discourse." Id. at 26, n.17. The Delaware Supreme Court has said that "in a parent and wholly owned subsidiary context, the directors of the subsidiary are obligated only to manage the affairs of the subsidiary in the best interests of the parent and its shareholders." Anadarko Petroleum Corp. v. Panhandle Eastern Corp., 545 A.2d 1171, 1174 (Del. 1988). Meanwhile, the district court in Al-Nahyan concluded that "the directors of a wholly-owned subsidiary owe the corporation fiduciary duties, just as they would any other corporation." 17 F. Supp. 2d at 26. As for legal commentators, one has argued that a fundamental rights analysis should be applied to differentiate legitimate from illegitimate shareholder demands in the wholly-owned subsidiary context. Another has suggested that due to the uniquely insulated nature of the relationship between a parent company and its wholly-owned subsidiary, directors of wholly-owned subsidiaries should be held to a lesser standard than other directors - perhaps all we should expect of them is to act as mere agents of the parent. In this article, I argue that precisely because the relationship between a parent company and its wholly-owned subsidiary is so insulated, directors of wholly-owned subsidiaries should be held to higher fiduciary standards than other directors. In the alternative, I argue that a derivative right to enforce the wholly-owned subsidiary director's duty to the corporation should be granted to certain stakeholders.

Number of Pages in PDF File: 51

Keywords: fiduciary, corporate, director, subsidiary

JEL Classification: K10, K22

Accepted Paper Series


Download This Paper

Date posted: May 18, 2006  

Suggested Citation

Padfield, Stefan J., In Search of a Higher Standard: Rethinking Fiduciary Duties of Directors of Wholly-Owned Subsidiaries. Fordham Journal of Corporate and Financial Law, Vol. 10, p. 79, 2004; U of Akron Legal Studies Research Paper No. 06-16. Available at SSRN: http://ssrn.com/abstract=902871

Contact Information

Stefan J. Padfield (Contact Author)
University of Akron School of Law ( email )
150 University Ave.
Akron, OH 44325-2901
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,364
Downloads: 223
Download Rank: 77,779
Footnotes:  187

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.250 seconds