Bite-Sized Business Law The Corporate Fiduciary Fallacy
Should we still be referring to corporate directors and officers as fiduciaries? During this episode, we challenge one of the bedrock assumptions of corporate law: that corporate officers and directors act as fiduciaries. Turns out they don’t, according to today’s guest. Their decisions, protected by the business judgment rule, made with limited liability and free to contract around, reflect something closer to discretion than duty. Marc Steinberg, the Rupert and Lilian Radford Chair in Law at SMU Dedman School of Law, proposes replacing the term “corporate fiduciaries” with “corporate discretionaries.” Why does it matter? Marc’s new book, Discretionaries Not Fiduciaries, explains why and shares a wealth of knowledge about the relationship between labels and standards in our legal system today.
Key Points From This Episode:
- What inspired Marc to write his latest book, published with Oxford University Press.
- The history of the term “fiduciary” and why director standards have become so relaxed.
- How exculpation statutes were born and what they necessitate.
- Why a higher degree of misconduct is required to hold a director liable for gross negligence than to convict someone of criminal negligence in Delaware.
- What led Marc to start using the word ‘discretionaries’ and how he hopes it will be used.
- The implications of this label shift.
- Why the current legislation is so permissive and why this is a problem.
- How the SB21 saga has reinforced his views.
- The business judgment rule and the neutrality of AI board members.
- Other examples of where we are mislabeling concepts in the law.
Links Mentioned in Today’s Episode:
Marc Steinberg on LinkedIn
Marc Steinberg Google Scholar
Corporate Director and Officer Liability
Rethinking Securities Law
American Book Fest
Marc Steinberg Books
Fordham University School of Law Corporate Law Center