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Hill, Claire A.; McDonnell, Brett H. --- "Fiduciary Duties: The Emerging Jurisprudence" [2012] ELECD 463; in Hill, A. Claire; McDonnell, H. Brett (eds), "Research Handbook on the Economics of Corporate Law" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on the Economics of Corporate Law

Editor(s): Hill, A. Claire; McDonnell, H. Brett

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848449589

Section: Chapter 8

Section Title: Fiduciary Duties: The Emerging Jurisprudence

Author(s): Hill, Claire A.; McDonnell, Brett H.

Number of pages: 19

Extract:

8. Fiduciary duties: The emerging jurisprudence
Claire A. Hill and Brett H. McDonnell



1. INTRODUCTION
Fiduciary duties are at the heart of corporate law. Directors manage corporations, and officers
do the day-to-day work; both are directed and constrained by the fiduciary duties they owe to
their corporations and to shareholders (and perhaps other constituencies as well). In this chap-
ter, we provide a brief overview of where fiduciary duty law has been, where it is now, and
where we believe it is and should be going.
A stylized version of fiduciary duty history carves the world into two types of duties: the
duty of care and the duty of loyalty. The duty of care covers attentiveness; the duty of loyalty
covers self-dealing. The former is a duty with few teeth, given that certificates of incorpora-
tion typically contain provisions relieving directors of liability for what would otherwise be
breaches of the duty. Moreover, where decisions (or omissions) are at issue that might impli-
cate the duty of care, courts are extremely deferential, in most cases declining to second-guess
what directors and officers did. That being said, the duty of care remains enormously influ-
ential as a guide to and constraint on director and officer conduct. The duty of loyalty covers
matters that appropriately invite significant scrutiny by courts ­ and carry a real risk of liabil-
ity (Hill & McDonnell 2007a).
But these two duties as classically articulated leave open a wide middle ground, where
neither inattentiveness nor ...


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