Empowering Courts in Corporate Law

The Journal of Corporation Law, VOL. 42 PP. 767-776 (Spring 2017)

11 Pages Posted: 1 Apr 2018

Date Written: April 19, 2017

Abstract

Fiduciary duties in corporate law are pervasive, but courts tend to be very deferential to directors. Courts are right to be reluctant to make substantive business decisions, but they would be wrong to refuse to decide cases when the circumstances require. In this address, I offer two proposals to help empower the courts to review directors’ decisions when necessary. First, I suggest that courts should consider being more liberal with injunctive and declaratory relief. In this way, courts could more clearly set forth the law without the risk of ruinous liability. Second, I suggest that courts should pay more attention to the larger issues involved rather than focus on the specific facts of the case. Because courts are extremely reluctant to accuse directors of bad faith, too great an emphasis on the facts of the case causes courts to search sympathetically for justifications of director behavior. By comparison, a greater emphasis on the rule will allow courts to find that the behavior in question is unacceptable without necessarily labeling the directors as bad actors. In other words, we can empower the courts by allowing them to say, "no—this is a bad idea,” rather than requiring them to say, “no—you are a bad person.”

Keywords: fiduciary duties, corporate law, corporate governance

JEL Classification: K20, K22

Suggested Citation

Velasco, Julian, Empowering Courts in Corporate Law (April 19, 2017). The Journal of Corporation Law, VOL. 42 PP. 767-776 (Spring 2017). Available at SSRN: https://ssrn.com/abstract=3150604

Julian Velasco (Contact Author)

Notre Dame Law School ( 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/directory/julian-velasco/

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