Pub Date : 2006-07-01DOI: 10.5465/AMR.2006.21318915
J. van Oosterhout, Pursey P.M.A.R. Heugens, M. Kaptein
Integrative social contracts theory is arguably the most promising theory of business ethics to date, but often criticized for its inability to produce substantive, action-guiding norms. Rather than importing moral substance from outside the contractualist framework, or abandoning contractualist business ethics (CBE) altogether, we seek to advance CBE by exploring the internal morality of contracting. We demonstrate that substantive norms for guiding and constraining business conduct can be produced without relying on premises from outside the contractualist framework.
{"title":"The Internal Morality of Contracting: Advancing the Contractualist Endeavor in Business Ethics","authors":"J. van Oosterhout, Pursey P.M.A.R. Heugens, M. Kaptein","doi":"10.5465/AMR.2006.21318915","DOIUrl":"https://doi.org/10.5465/AMR.2006.21318915","url":null,"abstract":"Integrative social contracts theory is arguably the most promising theory of business ethics to date, but often criticized for its inability to produce substantive, action-guiding norms. Rather than importing moral substance from outside the contractualist framework, or abandoning contractualist business ethics (CBE) altogether, we seek to advance CBE by exploring the internal morality of contracting. We demonstrate that substantive norms for guiding and constraining business conduct can be produced without relying on premises from outside the contractualist framework.","PeriodicalId":376950,"journal":{"name":"Fiduciary Law eJournal","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126086226","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The concerns that animated the Delaware supreme court's decision in Smith v. Van Gorkom - inattentive directors failing the shareholders at a critical juncture in a firm's life - could have lead, even after the legislature enacted Section 102(b)(7), to the development of a duty of care jurisprudence based on non-monetary remedies. Instead, the Delaware supreme court developed a new law of transactions, built around banner cases such as Unocal and Revlon. Now, two decades latter, we ask two key questions: First, is there any duty of care left in Delaware? And, if the answer to the first question is no, is that a bad thing? We answer the first question by tracing the waning of the duty of care: a rule that now requires little more of a director than a ritualistic consideration of relevant data. Today, after the director engages in this ritual, her decision will not violate the duty. In short, the classic duty of care no longer exists in Delaware. But the Delaware courts clearly are not about to countenance every business decision, no matter how incoherent or ill-advised. So, they struggle to fit cases into either the loyalty or transactional model, even when these tools are ill suited to the task. No better example of this trend exists than the Delaware supreme court's decision in Omnicare, Inc. v. NCS Healthcare, Inc., where the court struggled to apply Unocal's entrenchment-based structure to deal protection devices in a friendly stock for stock merger. Because we argue that Omnicare could have been better addressed under a classic duty of care analysis - no reasonable director would have agreed to totally lock up the deal - we answer our second question in the affirmative. There is a role, albeit a limited, narrow role, for the courts to review and question some decisions, even in the absence of loyalty or transactional concerns. Thus, we use this paper to highlight a subtle, and even unintended consequence of Delaware's increasing reliance on the loyalty and transactional duties. While the result may be the same regardless of which tool the courts use, attempts to fit classic duty of care cases under other headings - perhaps in a misguided attempt to avoid Section 102(b)(7) - only muddle the development of a coherent analytical framework. In this paper, we argue for a reinvigoration of the classic duty of care analysis to preserve the distinct roles played by the director's fiduciary duties.
促使特拉华州最高法院在Smith v. Van Gorkom案中做出裁决的担忧——在公司生命的关键时刻，疏忽的董事使股东失望——可能导致，即使在立法机关颁布了第102(b)(7)条之后，基于非货币救济的注意义务法理的发展。相反，特拉华州最高法院围绕优尼科(Unocal)和露华浓(Revlon)等标志性案件制定了一项新的交易法。二十年后的今天，我们要问两个关键问题:第一，在特拉华州还有注意义务吗?如果第一个问题的答案是否定的，这是件坏事吗?我们通过追溯注意义务的衰落来回答第一个问题:这条规则现在只需要对相关数据进行仪式性的考虑，而不需要更多的主管。今天，在主任进行这个仪式之后，她的决定不会违反职责。简而言之，传统的注意义务在特拉华州已不复存在。但特拉华州的法院显然不会支持每一个商业决定，无论多么不连贯或不明智。因此，即使这些工具不适合任务，他们也会努力将案例放入忠诚度模型或交易模型中。特拉华州最高法院在Omnicare, Inc.诉NCS Healthcare, Inc.一案中做出的裁决是这一趋势的最好例证。在该案中，法院努力将优尼科基于堑堑战的结构应用于友好股票对股票合并中的保护装置。因为我们认为Omnicare本可以在经典的注意义务分析下得到更好的解决——没有一个理性的董事会同意完全锁定这笔交易——我们对第二个问题的回答是肯定的。法院有一个作用，尽管是有限的、狭窄的作用，即审查和质疑一些决定，即使在没有忠诚或交易问题的情况下。因此，我们用这篇论文来强调特拉华州越来越依赖忠诚和交易义务的一个微妙的，甚至是意想不到的后果。虽然无论法院使用哪种工具，结果可能都是一样的，但试图将经典的注意义务案件放在其他标题下-也许是为了避免第102(b)(7)条的错误尝试-只会混淆连贯分析框架的发展。在本文中，我们主张重振经典的注意义务分析，以保留董事的信义义务所扮演的独特角色。
{"title":"Delaware's Duty of Care","authors":"S. Lubben, Alana J. Darnell","doi":"10.2139/SSRN.698223","DOIUrl":"https://doi.org/10.2139/SSRN.698223","url":null,"abstract":"The concerns that animated the Delaware supreme court's decision in Smith v. Van Gorkom - inattentive directors failing the shareholders at a critical juncture in a firm's life - could have lead, even after the legislature enacted Section 102(b)(7), to the development of a duty of care jurisprudence based on non-monetary remedies. Instead, the Delaware supreme court developed a new law of transactions, built around banner cases such as Unocal and Revlon. Now, two decades latter, we ask two key questions: First, is there any duty of care left in Delaware? And, if the answer to the first question is no, is that a bad thing? We answer the first question by tracing the waning of the duty of care: a rule that now requires little more of a director than a ritualistic consideration of relevant data. Today, after the director engages in this ritual, her decision will not violate the duty. In short, the classic duty of care no longer exists in Delaware. But the Delaware courts clearly are not about to countenance every business decision, no matter how incoherent or ill-advised. So, they struggle to fit cases into either the loyalty or transactional model, even when these tools are ill suited to the task. No better example of this trend exists than the Delaware supreme court's decision in Omnicare, Inc. v. NCS Healthcare, Inc., where the court struggled to apply Unocal's entrenchment-based structure to deal protection devices in a friendly stock for stock merger. Because we argue that Omnicare could have been better addressed under a classic duty of care analysis - no reasonable director would have agreed to totally lock up the deal - we answer our second question in the affirmative. There is a role, albeit a limited, narrow role, for the courts to review and question some decisions, even in the absence of loyalty or transactional concerns. Thus, we use this paper to highlight a subtle, and even unintended consequence of Delaware's increasing reliance on the loyalty and transactional duties. While the result may be the same regardless of which tool the courts use, attempts to fit classic duty of care cases under other headings - perhaps in a misguided attempt to avoid Section 102(b)(7) - only muddle the development of a coherent analytical framework. In this paper, we argue for a reinvigoration of the classic duty of care analysis to preserve the distinct roles played by the director's fiduciary duties.","PeriodicalId":376950,"journal":{"name":"Fiduciary Law eJournal","volume":"15 1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-01-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133544552","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Fiduciary funds are those that are both superior performers and likely to remain shareholder stewards. The purpose of this study is to provide fund investors with guidance for selecting fund advisors and fiduciary funds. Through application of four particular dimensions of analysis, shareholders are able to identify funds with attributes consistent with fiduciary funds.
{"title":"Investing in 'Fiduciary' Mutual Funds: How to Improve the Odds","authors":"John A. Haslem","doi":"10.2139/ssrn.2090084","DOIUrl":"https://doi.org/10.2139/ssrn.2090084","url":null,"abstract":"Fiduciary funds are those that are both superior performers and likely to remain shareholder stewards. The purpose of this study is to provide fund investors with guidance for selecting fund advisors and fiduciary funds. Through application of four particular dimensions of analysis, shareholders are able to identify funds with attributes consistent with fiduciary funds.","PeriodicalId":376950,"journal":{"name":"Fiduciary Law eJournal","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2005-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128248541","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
One of corporate law's enduring issues has been the extent to which state-to-state competitive pressures on Delaware make for a race to the top or the bottom. States, or at least some of them, are said to compete with their corporate law to get corporate tax revenue and ancillary benefits. Delaware has "won" that race, with the overwhelming number of American large corporations chartering there. Here I argue that this long-standing debate is misconceived. Delaware's chief competitive pressure comes not from other states but from the federal government. When the issue is big, the federal government takes the issue or threatens to do so, or Delaware players are conscious that if they mis-step, Federal authorities could step in. These possibilities of ouster, threat, and consciousness have conditioned Delaware's behavior. Moreover, even if Delaware were oblivious to the Federal authorities, those authorities can, and do, overturn Delaware law. That which persists is tolerable to the Federal authorities. This reconception a) explains corporate law developments and data that neither theory of state competition can explain well, b) fits several developments in takeover law, going private transactions, and the rhetoric of corporate governance in Delaware, and c) can be detected in corporate law-making in Washington and Wilmington from the very beginning in the early 20th century "origins" of Delaware's dominance right up through last summer's Sarbanes-Oxley corporate governance law and the corporate governance failure in Enron and WorldCom. This analysis upsets the long-standing analysis of state corporate law competition as a strong race (whether to the top or to the bottom) because when a corporate issue is important, the federal government takes it over, or threatens to do so, or Delaware fears federal action. As such, we cannot tell whether Delaware, if it indeed raced to the top, did so because of the looming federal "threat". Nor can we tell whether Delaware, if it raced to the bottom, a) did so because national politics meant that, had they taken the locally efficient path, Congress, subject to wider pressures than is Delaware, would have taken the issue away, or b) would have instead raced to the top on other, more important issues that directly affected the mechanisms of a race to the top, had the states fully controlled them. Nor can we tell if that which persists is that which the Federal players approved of, or at least found tolerable. Too many of the truly important decisions, the ones that could affect capital costs - the mechanism driving the race-the-top theory - are taken away from Delaware or are at risk of removal or the Delaware actors know could be taken away if they seriously damaged the national economy or riled powerful interests. That is not to say that what happens at the state level in corporate law is trivial, but that the results are ambiguous in terms of the race debate. If efficiency is the usual result, then the Federal
{"title":"Delaware's Competition","authors":"M. Roe","doi":"10.2307/3651948","DOIUrl":"https://doi.org/10.2307/3651948","url":null,"abstract":"One of corporate law's enduring issues has been the extent to which state-to-state competitive pressures on Delaware make for a race to the top or the bottom. States, or at least some of them, are said to compete with their corporate law to get corporate tax revenue and ancillary benefits. Delaware has \"won\" that race, with the overwhelming number of American large corporations chartering there. Here I argue that this long-standing debate is misconceived. Delaware's chief competitive pressure comes not from other states but from the federal government. When the issue is big, the federal government takes the issue or threatens to do so, or Delaware players are conscious that if they mis-step, Federal authorities could step in. These possibilities of ouster, threat, and consciousness have conditioned Delaware's behavior. Moreover, even if Delaware were oblivious to the Federal authorities, those authorities can, and do, overturn Delaware law. That which persists is tolerable to the Federal authorities. This reconception a) explains corporate law developments and data that neither theory of state competition can explain well, b) fits several developments in takeover law, going private transactions, and the rhetoric of corporate governance in Delaware, and c) can be detected in corporate law-making in Washington and Wilmington from the very beginning in the early 20th century \"origins\" of Delaware's dominance right up through last summer's Sarbanes-Oxley corporate governance law and the corporate governance failure in Enron and WorldCom. This analysis upsets the long-standing analysis of state corporate law competition as a strong race (whether to the top or to the bottom) because when a corporate issue is important, the federal government takes it over, or threatens to do so, or Delaware fears federal action. As such, we cannot tell whether Delaware, if it indeed raced to the top, did so because of the looming federal \"threat\". Nor can we tell whether Delaware, if it raced to the bottom, a) did so because national politics meant that, had they taken the locally efficient path, Congress, subject to wider pressures than is Delaware, would have taken the issue away, or b) would have instead raced to the top on other, more important issues that directly affected the mechanisms of a race to the top, had the states fully controlled them. Nor can we tell if that which persists is that which the Federal players approved of, or at least found tolerable. Too many of the truly important decisions, the ones that could affect capital costs - the mechanism driving the race-the-top theory - are taken away from Delaware or are at risk of removal or the Delaware actors know could be taken away if they seriously damaged the national economy or riled powerful interests. That is not to say that what happens at the state level in corporate law is trivial, but that the results are ambiguous in terms of the race debate. If efficiency is the usual result, then the Federal ","PeriodicalId":376950,"journal":{"name":"Fiduciary Law eJournal","volume":"74 11","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131893335","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Corporations frequently, make use of precommitment strategies. Examples include such widely used devices as negative pledge covenants and change of control clauses in bond indentures fair price shark repellents, no shop and other exclusivity provisions , in merger agreements, mandatory indemnification bylaws, and so on. This paper argues that poison pills also can be understood as a form of precommitment, by which the board of directors commits to a policy, intended either to negotiate a high acquisition price or to maintain the corporation's independence. In Quickturn Design Sys., Inc. v. Mentor Graphics Corp., the Delaware supreme court invalidated a no hand poison pill on grounds that a board of directors lacks authority to adopt such devices. In doing so, the court misinterpreted relevant Delaware law. It's unjustifiably called into question the validity of a host of corporate precominitment strategies. Finally, and perhaps most troublingly, it called into question the central tenet of Delaware corporate law; namely, the plenary authority of the board of directors. This article argues that the Delaware supreme court's decision was wrong both as a doctrinal and a policy matter. There simply is no firebreak between the sorts of board self disablement deemed invalid by Quickturn and the host of other precommitment strategies routinely used by corporate boards of directors. The Delaware supreme court's conclusion that the former are invalid for lack of statutory authority thus threatens to invalidate all of the latter. The article concludes by arguing that the Delaware supreme court should have analyzed the no hand pill under standard fiduciary d4ty principles rather than creating a new prophylactic ban on precommitment strategies.
{"title":"Dead Hand and No Hand Pills: Precommitment Strategies in Corporate Law","authors":"Stephen M. Bainbridge","doi":"10.2139/ssrn.347089","DOIUrl":"https://doi.org/10.2139/ssrn.347089","url":null,"abstract":"Corporations frequently, make use of precommitment strategies. Examples include such widely used devices as negative pledge covenants and change of control clauses in bond indentures fair price shark repellents, no shop and other exclusivity provisions , in merger agreements, mandatory indemnification bylaws, and so on. This paper argues that poison pills also can be understood as a form of precommitment, by which the board of directors commits to a policy, intended either to negotiate a high acquisition price or to maintain the corporation's independence. In Quickturn Design Sys., Inc. v. Mentor Graphics Corp., the Delaware supreme court invalidated a no hand poison pill on grounds that a board of directors lacks authority to adopt such devices. In doing so, the court misinterpreted relevant Delaware law. It's unjustifiably called into question the validity of a host of corporate precominitment strategies. Finally, and perhaps most troublingly, it called into question the central tenet of Delaware corporate law; namely, the plenary authority of the board of directors. This article argues that the Delaware supreme court's decision was wrong both as a doctrinal and a policy matter. There simply is no firebreak between the sorts of board self disablement deemed invalid by Quickturn and the host of other precommitment strategies routinely used by corporate boards of directors. The Delaware supreme court's conclusion that the former are invalid for lack of statutory authority thus threatens to invalidate all of the latter. The article concludes by arguing that the Delaware supreme court should have analyzed the no hand pill under standard fiduciary d4ty principles rather than creating a new prophylactic ban on precommitment strategies.","PeriodicalId":376950,"journal":{"name":"Fiduciary Law eJournal","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-10-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128678565","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the United States, the level of concern over 401(k) fees is steadily increasing. However, very few employers understand the nature and scope of the retirement plan industry's business model. Not even the Federal Government fully grasps the issue. Understanding how hidden fees came about, and recognizing the specific types and amounts of such fees, will help employers make better decisions regarding 401(k) services. That understanding will help create a more secure retirement for American workers. Notwithstanding the obscure nature of retirement plan economics there is a rigorous way to determine the costs of any such plan. Directors, officers, and executives of plan sponsors have a fiduciary duty to know, manage, and control all of the fees assessed to plan assets. Modern fee structures are the result of mingling fiduciary and non-fiduciary philosophies. Hidden and excessive fees can be corrected by embracing an independent fiduciary only approach toward plan management. There is more at stake than is generally contemplated. Correcting errant business practices in the 401(k) industry is important for participants, plan sponsors, and society as a whole.
{"title":"Uncovering and Understanding Hidden Fees in Qualified Retirement Plans","authors":"Matt Hutcheson","doi":"10.2139/ssrn.961996","DOIUrl":"https://doi.org/10.2139/ssrn.961996","url":null,"abstract":"In the United States, the level of concern over 401(k) fees is steadily increasing. However, very few employers understand the nature and scope of the retirement plan industry's business model. Not even the Federal Government fully grasps the issue. Understanding how hidden fees came about, and recognizing the specific types and amounts of such fees, will help employers make better decisions regarding 401(k) services. That understanding will help create a more secure retirement for American workers. Notwithstanding the obscure nature of retirement plan economics there is a rigorous way to determine the costs of any such plan. Directors, officers, and executives of plan sponsors have a fiduciary duty to know, manage, and control all of the fees assessed to plan assets. Modern fee structures are the result of mingling fiduciary and non-fiduciary philosophies. Hidden and excessive fees can be corrected by embracing an independent fiduciary only approach toward plan management. There is more at stake than is generally contemplated. Correcting errant business practices in the 401(k) industry is important for participants, plan sponsors, and society as a whole.","PeriodicalId":376950,"journal":{"name":"Fiduciary Law eJournal","volume":"124 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128157275","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this Article, I imagine a post-class action landscape for shareholder litigation. Assuming, for the sake of this exercise, an environment in which both securities-fraud and transactional class actions are hobbled by procedural or substantive reforms — most likely through the adoption of mandatory-arbitration provisions or fee-shifting provisions — I assess what shareholder litigation would disappear, what would remain, and what a post-class action landscape would look like. I argue that loss of the class action would remove a layer of legal insulation that prevents institutional investors from having to pursue positive value claims against companies. Currently, the class action effectively ratifies fund fiduciary passivity in the face of fraud, for example, as long as the institution files a claim form to collect its share of a class action settlement that has been judicially certified. But without the class action, monitoring and litigation costs for such institutions may increase because fund fiduciaries must monitor their portfolios for, and litigate, positive value claims. Failure to do so could expose them to liability to fund beneficiaries. I offer some suggestive, but incomplete, evidence about how many funds will have positive value claims. I also argue that bizarre gaps in liability coverage for public-pension fund fiduciaries — who serve the funds that have traditionally been the most active litigants — may have unpredictable effects on trustee behavior outside the class action, may tilt in favor of bringing claims, and may also lead to herding behavior in arbitration. I also assess how loss of the class action would affect plaintiff law firms, sketching out scenarios in which these firms disappear, or face new competition from traditional firms, or survive (in small numbers) and perhaps thrive representing institutional investors. I argue that the end of the class action means abandonment of the idea that all investors should be compensated for losses due to fraud or other corporate malfeasance, and I demonstrate that loss of the class action leaves investors in smaller firms with no remedy for wrongdoing.I argue that shareholder litigation without class actions creates a new distortion in the private enforcement regime, what I call the “semi-circularity problem.” Without class actions, negative value claimants would no longer be able to recover for their damages in shareholder litigation. But they would still be forced to subsidize the losses of positive-value claimants to the extent that the smaller investors own shares in defendant companies that must pay damages claims to large institutional investor plaintiffs. Loss of the class action device creates a two-tier legal system for investors: one in which large institutions recover while individuals and smaller institutions do not from the same fraud (or mispriced deal), and one in which smaller investors that still own defendant companies must reach further into their pockets to c
{"title":"Shareholder Litigation Without Class Actions","authors":"David H. Webber","doi":"10.2139/SSRN.2456909","DOIUrl":"https://doi.org/10.2139/SSRN.2456909","url":null,"abstract":"In this Article, I imagine a post-class action landscape for shareholder litigation. Assuming, for the sake of this exercise, an environment in which both securities-fraud and transactional class actions are hobbled by procedural or substantive reforms — most likely through the adoption of mandatory-arbitration provisions or fee-shifting provisions — I assess what shareholder litigation would disappear, what would remain, and what a post-class action landscape would look like. I argue that loss of the class action would remove a layer of legal insulation that prevents institutional investors from having to pursue positive value claims against companies. Currently, the class action effectively ratifies fund fiduciary passivity in the face of fraud, for example, as long as the institution files a claim form to collect its share of a class action settlement that has been judicially certified. But without the class action, monitoring and litigation costs for such institutions may increase because fund fiduciaries must monitor their portfolios for, and litigate, positive value claims. Failure to do so could expose them to liability to fund beneficiaries. I offer some suggestive, but incomplete, evidence about how many funds will have positive value claims. I also argue that bizarre gaps in liability coverage for public-pension fund fiduciaries — who serve the funds that have traditionally been the most active litigants — may have unpredictable effects on trustee behavior outside the class action, may tilt in favor of bringing claims, and may also lead to herding behavior in arbitration. I also assess how loss of the class action would affect plaintiff law firms, sketching out scenarios in which these firms disappear, or face new competition from traditional firms, or survive (in small numbers) and perhaps thrive representing institutional investors. I argue that the end of the class action means abandonment of the idea that all investors should be compensated for losses due to fraud or other corporate malfeasance, and I demonstrate that loss of the class action leaves investors in smaller firms with no remedy for wrongdoing.I argue that shareholder litigation without class actions creates a new distortion in the private enforcement regime, what I call the “semi-circularity problem.” Without class actions, negative value claimants would no longer be able to recover for their damages in shareholder litigation. But they would still be forced to subsidize the losses of positive-value claimants to the extent that the smaller investors own shares in defendant companies that must pay damages claims to large institutional investor plaintiffs. Loss of the class action device creates a two-tier legal system for investors: one in which large institutions recover while individuals and smaller institutions do not from the same fraud (or mispriced deal), and one in which smaller investors that still own defendant companies must reach further into their pockets to c","PeriodicalId":376950,"journal":{"name":"Fiduciary Law eJournal","volume":"490 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123407380","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article applies the concept of remedial consistency – consistency of a remedial right with a primary right – to the case of proprietary claims in the form of a constructive trust. The article explains how the concept of remedial consistency applies to the trust and to the constructive trust and the difference between breaches of duty and invalid transfers with respect to remedial consistency, and it applies the approach to three types of case: mistaken and unauthorised payments, fiduciary profits, and proprietary rights of cohabiting partners in the family home. It argues that the suggested approach can resolve some longstanding academic controversies and some practical problems in these areas.
{"title":"Remedial Consistency and Constructive Trust Claims","authors":"Peter Jaffey","doi":"10.2139/ssrn.3798734","DOIUrl":"https://doi.org/10.2139/ssrn.3798734","url":null,"abstract":"This article applies the concept of remedial consistency – consistency of a remedial right with a primary right – to the case of proprietary claims in the form of a constructive trust. The article explains how the concept of remedial consistency applies to the trust and to the constructive trust and the difference between breaches of duty and invalid transfers with respect to remedial consistency, and it applies the approach to three types of case: mistaken and unauthorised payments, fiduciary profits, and proprietary rights of cohabiting partners in the family home. It argues that the suggested approach can resolve some longstanding academic controversies and some practical problems in these areas.","PeriodicalId":376950,"journal":{"name":"Fiduciary Law eJournal","volume":"42 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115779952","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
C. Gerner-Beuerle, P. Paech, Edmund-Philipp Schuster
The liability regime of executive and non-executive directors in companies constitutes a necessary corollary to control issues within a company. It is based on the determination of specific duties, it establishes the limits of management behaviour and it provides stakeholders and third parties dealing with the company with legislative protection against management misconduct. In that respect, directors' liability is an important and effective compliance and risk-allocation mechanism. The European Commission has not, to date, considered directors' liability issues in a comprehensive way. It is the purpose of this study to provide the relevant information in a comprehensive manner, in order to support to European Commission to consider its future policy in this area. To this end, the analysis spans from national laws and case law to corporate practice in respect of companies’ directors duties in all 27 EU Member States and Croatia.1 The overarching goal is to provide for a better understanding of certain important drivers of directors' behaviour. This study shows the extent to which the content and extent of duties and the corresponding liabilities, as well as the understanding of the persons to whom they are owed, fluctuate over the life of a company, i.e. during the "normal" phase of operation, and in the so called "twilight zone", i.e. shortly before insolvency. The study is mainly a stocktaking one. However, its comparative analysis also identifies similarities and differences between national regimes and identifies relevant cross-border implications.
{"title":"Study on Directors’ Duties and Liability in Europe","authors":"C. Gerner-Beuerle, P. Paech, Edmund-Philipp Schuster","doi":"10.2139/ssrn.3886382","DOIUrl":"https://doi.org/10.2139/ssrn.3886382","url":null,"abstract":"The liability regime of executive and non-executive directors in companies constitutes a necessary corollary to control issues within a company. It is based on the determination of specific duties, it establishes the limits of management behaviour and it provides stakeholders and third parties dealing with the company with legislative protection against management misconduct. In that respect, directors' liability is an important and effective compliance and risk-allocation mechanism. The European Commission has not, to date, considered directors' liability issues in a comprehensive way. It is the purpose of this study to provide the relevant information in a comprehensive manner, in order to support to European Commission to consider its future policy in this area. To this end, the analysis spans from national laws and case law to corporate practice in respect of companies’ directors duties in all 27 EU Member States and Croatia.1 The overarching goal is to provide for a better understanding of certain important drivers of directors' behaviour. This study shows the extent to which the content and extent of duties and the corresponding liabilities, as well as the understanding of the persons to whom they are owed, fluctuate over the life of a company, i.e. during the \"normal\" phase of operation, and in the so called \"twilight zone\", i.e. shortly before insolvency. The study is mainly a stocktaking one. However, its comparative analysis also identifies similarities and differences between national regimes and identifies relevant cross-border implications.","PeriodicalId":376950,"journal":{"name":"Fiduciary Law eJournal","volume":"65 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131355370","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper discusses the Malaysian audit committee's duties from the legal perspective. The discussion covers audit committee's fiduciary duties, duty to be diligent, duty of care and skill and statutory duties.
{"title":"Audit Committees: From the Legal Perspective","authors":"A. Razak, Zulkarnain Muhamad Sori, S. Mohamad","doi":"10.2139/SSRN.613161","DOIUrl":"https://doi.org/10.2139/SSRN.613161","url":null,"abstract":"This paper discusses the Malaysian audit committee's duties from the legal perspective. The discussion covers audit committee's fiduciary duties, duty to be diligent, duty of care and skill and statutory duties.","PeriodicalId":376950,"journal":{"name":"Fiduciary Law eJournal","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125080717","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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