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A Defense of the Corporate Law Duty of Care

40 J. Corp. L. 647 (2015)

Notre Dame Legal Studies Paper No. 1429

58 Pages Posted: 4 Sep 2014 Last revised: 16 May 2015

Julian Velasco

University of Notre Dame

Date Written: August 12, 2014

Abstract

Most people would acknowledge the importance of the duty of loyalty, but the same is not true of the duty of care. Historically, the corporate law duty of care has been underenforced at best, and arguably unenforced entirely. Some scholars do not consider the duty of care to be a fiduciary duty at all, and there are those who would do away with it entirely. In this paper, I intend to provide a comprehensive defense of the corporate law fiduciary duty of care. I hope to show that the duty of care is not simply an ill-fitting appendage to the duty of loyalty, but rather an essential aspect of the singular fiduciary concept that also encompasses the duty of loyalty. Simply put, a fiduciary has the duty to act in the interests of the beneficiary in all relevant respects. Once the breadth of this singular fiduciary concept is properly understood, it is revealed to be much more than any of the individual duties that it comprises. Far from being streamlined or focused, fiduciary law would be impoverished if it were limited to the duty of loyalty. However, I do not intend to argue for a more robust duty of care. Rather, I will defend the duty of care as it currently exists in corporate law (more or less) — deliberately and advisedly underenforced, but not entirely unenforced. The duty of care works in the corporate context precisely because caution is built into the enforcement equation.

Keywords: fiduciary duties, corporate law, duty of care, standards of review, corporate governance

JEL Classification: K20, K22

Suggested Citation

Velasco, Julian, A Defense of the Corporate Law Duty of Care (August 12, 2014). 40 J. Corp. L. 647 (2015); Notre Dame Legal Studies Paper No. 1429. Available at SSRN: https://ssrn.com/abstract=2491223

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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