How Many Fiduciary Duties Are There in Corporate Law?

Julian Velasco

University of Notre Dame


Southern California Law Review, Vol. 83, No. 6, pp. 1213-1318, 2010
Notre Dame Legal Studies Paper No. 09-35

Historically, there were two main fiduciary duties in corporate law, care and loyalty, and only the duty of loyalty was likely to lead to liability. In the 1980s and 1990s, the Delaware Supreme Court breathed life into the duty of care, created a number of intermediate standards of review, elevated the duty of good faith to equal standing with care and loyalty, and announced a unified test for review of breaches of fiduciary duty. The law, which once seemed so straightforward, suddenly became elaborate and complex. In 2006, in the case of Stone v. Ritter, the Delaware Supreme Court rejected the triadic formulation and declared that good faith was a component of the duty of loyalty. In this and other respects, Delaware seems to be returning to a bifurcated understanding of the law of fiduciary duties. I believe that this is a mistake. The law is inherently complex and much too important to be oversimplified.

The current academic debate on the issue focuses on whether there should be two duties or three. In this article, I argue that the question is misleading and irrelevant, but that if it must be asked, the best answer is that there are five duties - one for each paradigm of enforcement. In defending this claim, I explain the true nature of fiduciary duties and provide a robust framework for the discussion, implementation, and development of the law.

Number of Pages in PDF File: 89

Keywords: fiduciary duties, corporate law, good faith, reasonableness, standards of review, corporate governance

JEL Classification: K20, K22

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Date posted: August 19, 2009 ; Last revised: January 9, 2011

Suggested Citation

Velasco, Julian, How Many Fiduciary Duties Are There in Corporate Law? (2009). Southern California Law Review, Vol. 83, No. 6, pp. 1213-1318, 2010; Notre Dame Legal Studies Paper No. 09-35. Available at SSRN: https://ssrn.com/abstract=1457804 or http://dx.doi.org/10.2139/ssrn.1457804

Contact Information

Julian Velasco (Contact Author)
University of Notre Dame ( email )
2142 Eck Hall of Law
P.O. Box 780
Notre Dame, IN 46556-0780
United States
574-631-4965 (Phone)
HOME PAGE: http://law.nd.edu/faculty/julian-velasco

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