Restoring the Balance of Power in Corporate Management: Enforcing an Officer's Duty of Obedience

66 The Business Lawyer 27 (2010)

34 Pages Posted: 5 Sep 2015

See all articles by Megan W Shaner

Megan W Shaner

University of Oklahoma College of Law

Date Written: November 1, 2010

Abstract

The issue of corporate officers' fiduciary duties has been a neglected area of Delaware law for over seventy years. This is surprising given the power and authority that these individuals wield over a corporation's business and affairs. The transgressions that took place at large public corporations such as Enron and WorldCom serve as reminders, even after all these years, of how officer misconduct can dramatically affect a corporation's fortunes. Following the scandals that occurred in corporate America in the beginning of the twenty-first century, as well as those that emerged in the recent financial crisis, there has been a renewed focus in certain quarters on rethinking the officer-centric model of corporate management that has come to exist.

Viewed as an effective means of achieving good corporate governance, much of the discussions surrounding increasing officer accountability pertain to the appropriate model for officer fiduciary duties and the standard of liability for such duties. This article discusses the application to officers of the duty of obedience that exists in agency law and asserts that emphasizing this duty of officers would be an effective step toward restoring the proper balance of power in corporate management. Based on the concept that certain persons are not only subject to the authority and direction of others in an organization's hierarchy, but have an affirmative duty to implement those directions, the duty of obedience exemplifies the relationship between directors and officers contemplated by corporate statutes and case law. Accordingly, this article asserts that focusing on enforcing the fiduciary duty of obedience would advance efforts to distinguish more clearly the governance responsibilities of officers from those of directors as well as increase officer accountability.

Keywords: officer, corporate governance, Gantler v. Stephens, fiduciary duties, duty of obedience, board of directors, accountability, corporate management

JEL Classification: K22, G30, G34, M14

Suggested Citation

Shaner, Megan, Restoring the Balance of Power in Corporate Management: Enforcing an Officer's Duty of Obedience (November 1, 2010). 66 The Business Lawyer 27 (2010). Available at SSRN: https://ssrn.com/abstract=2655879

Megan Shaner (Contact Author)

University of Oklahoma College of Law ( email )

300 Timberdell Road
Norman, OK 73019
United States
405-325-6619 (Phone)

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