The impact of the law and economics movement on legal scholarship, legal analysis, and, ultimately, on the rules under which our society operates is substantial. The proponents of this movement ("Contractarians") articulate their positions skillfully and apply their principles broadly across the entire spectrum of our laws, including, of course, the area of corporate law.
The purpose of this Article is to propose, explain, and defend broad and unifying principles to guide the development of fiduciary duties of corporate managers in the post-Contractarian period. These principles are based on Pareto criteria, which are demonstrably appealing to society and provide workable and morally attractive bases for a development of corporate fiduciary rules. Thus, while the proposed principles sound not unfamiliar, one should not underestimate the significant changes in the present law of corporate fiduciary duties that would be wrought by a broad application of the proposed principles.
Although the major thrust of this Article deals with traditional, broadly formulated corporate fiduciary duties, duties that have most usually been developed through court decisions, the principles are intended to have a more expansive application. Specifically, the principles are proposed as appropriate guides not only for courts applying generalized fiduciary standards but also for legislatures enacting specific laws dealing with corporate managers’ fiduciary obligations. Indeed, some of the implementations of the principles exceed the capabilities of courts and thus require legislative action.
In order to illuminate these principles, part II of this Article reviews the debate between the Contractarians and those opposed to the Contractarians’ position (“Regulators”) and proposes an explanation as to why it is entirely appropriate that the Contractarians lost their attempt to eliminate all mandatory fiduciary duties. Part Ill offers observations concerning corporate managers and the other corporate constituencies affected by the actions of corporate managers and focuses specifically on how these parties act as rational maximizers. Part IV describes and defends the suggested fiduciary principles. In part V, the principles are applied to familiar corporate problems to demonstrate the sensibleness of these proposals and the extent of the changes they effect.
Rutheford B Campbell, Corporate Fiduciary Principles for the Post-Contractarian Era, 23 Fla. St. L. Rev. 561 (1996).