The Vacuity of Wilkes
38 Pages Posted: 1 Apr 2012
Date Written: March 29, 2012
In Wilkes v. Springside Nursing Home, the Massachusetts Supreme Judicial Court sought to clarify the fiduciary duty it had previously imposed upon majority shareholders in closely held corporations. As the Court recognized, the fiduciary duty cannot be absolute, because majority shareholders also have a right of selfish ownership. This Article, prepared for a symposium marking the 35th anniversary of the Wilkes decision, contends that the Court failed to provide a clear standard for assessing claims of minority shareholder oppression. In part, the lack of a determinate standard reflects the plural values at stake. However, the Court’s reliance upon fiduciary analysis invites confusion: minority shareholder oppression may be better understood as an extension of contract theory, providing a constraint against opportunistic action by the majority that violates the parties’ reasonable expectations in entering into a long-term business relationship.
Keywords: shareholder oppression, fiduciary duty, relational contract, value pluralism, close corporation, corporate governance, reasonable expectations
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