Fiduciary Duties (from Corporations in 100 Pages)

Corporations in 100 Pages, 2020

13 Pages Posted: 14 Oct 2020

See all articles by Holger Spamann

Holger Spamann

Harvard Law School; ECGI

Scott Hirst

Boston University - School of Law; Harvard Law School Program on Corporate Governance

Gabriel V. Rauterberg

University of Michigan Law School

Date Written: July 18, 2020

Abstract

This is the fifth chapter of the book Corporations in 100 Pages (2020), authored by Holger Spamann, Scott Hirst, and Gabriel Rauterberg. The book is an introduction to corporate law for students and anyone else interested in the foundations of corporate law. The book provides an accessible, self-contained presentation of the field’s essentials: what corporations are, how they are governed, their interactions with their investors, and other stakeholders, major transactions (M&A), and parallels with other legal entities, including partnerships. Optional background chapters cover the investor ecosystem, contemporary corporate governance, and corporate finance. The book’s exposition of doctrine and policy is nuanced and sophisticated, yet short and simple enough for a quick read.

In addition to this Chapter 5 of the book (“Fiduciary Duties”), we have also made available on SSRN Chapter 1 of the book (“Corporations & Corporate Law”) (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3655213), and Chapter 7 (“Mergers & Acquisitions”) (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3655218).

Chapter 5 explains the law governing “Fiduciary Duties,” which are legal duties imposed on specific individuals (“fiduciaries”) who exercise power on behalf of others. The chapter first provides an overview of corporate fiduciary duties: who owes what to whom, and introduces the principal fiduciary duties of care and of loyalty. The chapter then distinguishes standards of conduct and standards of review, and explains the two main standards of review that apply to fiduciary duties in corporate law, the “business judgment rule” and “entire fairness.” The chapter then explains how these standards of review apply to the paradigm cases of self-dealing and mere carelessness, as well as to cases involving corporate opportunities, bad faith, knowing violations of law, and (lack of) candor or oversight.

Keywords: Fiduciary duties, duty of care, duty of loyalty, business judgment rule, entire fairness, Caremark, corporate opportunities

Suggested Citation

Spamann, Holger and Hirst, Scott and Rauterberg, Gabriel V., Fiduciary Duties (from Corporations in 100 Pages) (July 18, 2020). Corporations in 100 Pages, 2020 , Available at SSRN: https://ssrn.com/abstract=3655217

Holger Spamann

Harvard Law School ( email )

Cambridge, MA 02138
United States

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Scott Hirst

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Harvard Law School Program on Corporate Governance ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

Gabriel V. Rauterberg (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

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