ROBERT FLANNIGAN, University of Saskatchewan
Email: R.Flannigan@usask.ca

When authority is transferred for a defined or limited purpose, the recipient of the authority serves as a surrogate to advance that purpose. A trustee is one kind of surrogate. My objective here is to explain how the law of fiduciary accountability addresses the opportunism mischief that is latent in surrogate authority. I first explain the nature, virtue and limited access of surrogate authority. I then explain the accountability. I show that it applies to trustees in the same way that it applies to, for example, public servants, agents, directors, partners and parents. Then, in order to further emphasise that the mischief of opportunism is a generic mischief that is corrosive of surrogate authority in all contexts, I focus on two areas of current interest, the misuse of authority for sexual gain by employees and the exploitation of authority by police. These might initially seem to be odd areas to link analytically. The linkage, however, is informative. It illustrates that fiduciary accountability is not tied to or reflective of the idiocracy of the diverse contexts where surrogates exercise authority.

ANDREW S. GOLD, Brooklyn Law School
Email: andrew.gold@brooklaw.edu

This chapter is a contribution to a book on John Gardner’s work in private law theory. The chapter takes up a puzzle that Gardner raised: why is there no “reasonably loyal trustee” in fiduciary law? Notably, he proposes that the role of a trustee might lack a law-independent counterpart. That, in turn, could make it impossible for trust law (and by implication, fiduciary law) to “pass the buck” to whatever it is that the “reasonably loyal person” would do. I will suggest that fiduciary relationships frequently do have law-independent counterparts, and moreover that such counterparts can evolve over time. Relatedly, I will argue that a wide range of extra-legal conceptions of loyalty are available for buck passing purposes; not all loyalty is built on a prior meaningful relationship between a loyal party and the object of her loyalty. Lastly, I will conclude with some thoughts on why buck passing could be valuable.

ELIEZER M. FICH, Drexel University - Department of Finance
Email: emf35@drexel.edu
JARRAD HARFORD, University of Washington, European Corporate Governance Institute (ECGI)
Email: jarrad@u.washington.edu
ANH L. TRAN, Bayes Business School (formerly Cass Business School), City University of London
Email: anh.tran@city.ac.uk

The prohibition against fiduciaries appropriating business opportunities from their companies is a fundamental part of the duty of loyalty, the expectation of which is integral to U.S. corporate governance. However, starting in 2000, several states, including Delaware, allowed boards to waive this duty. Exploiting the staggered passage of waiver laws, we show that this weakening of fiduciary duty has significantly decreased public firms’ investment in innovation. Firms covered by waiver laws invest less in R&D, and produce fewer and less valuable patents. Remaining innovation activities contribute less to firm value, a fact confirmed by the market reaction when firms reveal their curtailed internal growth opportunities by announcing acquisitions. Consistent with the laws’ intent to provide contracting flexibility to emerging firms, we do find evidence of positive impacts for small firms.

CHRISTOPHER M. BRUNER, University of Georgia School of Law
Email: christopher.bruner@uga.edu

The prospects for Artificial Intelligence (AI) to impact the development of Delaware corporate law are at once over- and under-stated. As a general matter, claims to the effect that AI systems might ultimately displace human directors not only exaggerate the foreseeable technological potential of these systems, but also tend to ignore doctrinal and institutional impediments intrinsic to Delaware's competitive model – notably, heavy reliance on nuanced and context-specific applications of the fiduciary duty of loyalty by a true court of equity. At the same time, however, there are specific applications of AI systems that might not merely be accommodated by Delaware corporate law, but perhaps eventually required. Such an outcome would appear most plausible in the oversight context, where fiduciary loyalty has been interpreted to require good faith effort to adopt a reasonable compliance monitoring system, an approach driven by an implicit cost-benefit analysis that could lean decisively in favor of AI-based approaches in the foreseeable future.
This article discusses the prospects for AI to impact Delaware corporate law in both general and specific respects and evaluates their significance. Section II describes the current state of the technology and argues that AI systems are unlikely to develop to the point that they could displace the full range of functions performed by human boards in the foreseeable future. Section III, then, argues that even if the technology were to achieve more impressive results in the near-term than I anticipate, acceptance of non-human directors would likely be blunted by doctrinal and institutional structures that place equity at the very heart of Delaware corporate law. Section IV, however, suggests that there are nevertheless discrete areas within Delaware corporate law where reliance by human directors upon AI systems for assistance in board decision-making might not merely be accommodated, but eventually required. This appears particularly plausible in the oversight context, where fiduciary loyalty has become intrinsically linked with adoption of compliance monitoring systems that are themselves increasingly likely to incorporate AI technologies. Section V briefly concludes.