Fiduciary Judgment Rules

53 Pages Posted: 29 Jun 2021

Date Written: June 22, 2021

Abstract

Because of the strong moral rhetoric and robust equitable remedies available in fiduciary law, it
is not surprising to find lawyers and legal scholars seeking to expand the reach of fiduciary law principles into new relationships and new areas of law. However, expansion often does not work very well because of the demanding and pervasive nature of fiduciary duties. Thus, jurists often turn to the business judgment rule and its policy of underenforcement of fiduciary duties as a way to fit fiduciary law principles into other areas of law. The problem with this approach is that it is based on a deficient understanding of the corporate law model. The business judgment rule is not an arbitrary abstention policy but rather a prudential policy decision that advances the beneficiaries’ interests in the unique context of the business setting. Because its theoretical underpinnings tend to be absent from other relationships, the business judgment rule cannot serve as a model for
indiscriminate expansion of fiduciary areas of law. For the same reasons, any policy of deferential review of fiduciary duties would have to be based on other considerations.

Keywords: corporate law, fiduciary duties, corporate governance, business judgment rule

JEL Classification: K20 K22

Suggested Citation

Velasco, Julian, Fiduciary Judgment Rules (June 22, 2021). William & Mary Law Review, Vol. 62, No. 1397, 2021, Available at SSRN: https://ssrn.com/abstract=3871881

Julian Velasco (Contact Author)

Notre Dame Law School ( email )

2142 Eck Hall of Law
Notre Dame, IN 46556-0780
United States
574-631-4965 (Phone)

HOME PAGE: http://law.nd.edu/directory/julian-velasco/

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