Debunking the Corporate Fiduciary Myth
44 Pages Posted: 5 Mar 2009 Last revised: 15 Sep 2011
Date Written: March 3, 2009
Corporate governance law is based on the premise that directors and officers are fiduciaries of the corporation. Scholars and courts have grappled with how best to define and enforce corporate fiduciary duties. Those efforts have resulted in the atrophy of corporate fiduciary duties to the point of obsolescence. This paper challenges the basic fiduciary premise of corporate governance law and reveals that the relationship between corporate managers and their respective firms is not a fiduciary one. Rather, the relationship among directors, officers, and corporations is one governed by narrow, judicially enforced standards that no longer resemble fiduciary obligations. Recognizing that the nature of the corporate governance relationships has changed dramatically and has moved to a post-fiduciary regime is an important first step in reshaping corporate governance to better fit the difficult times it now confronts. After debunking the corporate fiduciary myth, the article presents a new vision of corporate governance, one that is rooted in contractually-based disciplinary regimes that bind corporate managers, a more effective and efficient approach to regulating corporate governance.
Keywords: corporate governance, corporate law, fiduciary duties, contract
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