Officers' fiduciary duties and the nature of corporate organs

Research output: Contribution to journalArticle

Abstract

The nature of officers' fiduciary duties (and in particular whether the Business Judgment Rule applies to officers) is the subject of heated scholarly debaie and conflicting case law, This Arîicle analyzes the question using a neglected conceptual îool: the corporate organ. Corporate organs are bodies that act on behalf of the Corporation but are not subject to its control and thus are not governed by agency law (the board of directors is the prototypical organ). This Arîicle argues that corporate organs differ from, and complement, the other type of corporate actor (corporate agents) in the allocation of discretion whether to approve acts that are in the fiduciary duty penumbra. For agents, this oversight function is given (o the beneficiary (the principal); for organs, it is given to judges. The nature of an officer's fiduciary duties depends on whether oversight by the beneficiary, or by judges, would maximize accountability. The answer differs between officers, so in contrast to the arguments of both sides of the debate, officers should not be uniformly classified as agents or organs, Such classification is best left to private ordering, Extant law allows for such private ordering but provides officers with an incentive to maintain an ambiguous status. This Article suggests tweaks to the law that would incentivize officers to seifselect their status as organs or agents.

Original languageEnglish (US)
Pages (from-to)763-784
Number of pages22
JournalUniversity of Illinois Law Review
Volume2013
Issue number3
StatePublished - Jul 18 2013
Externally publishedYes

Fingerprint

Law
board of directors
case law
corporation
incentive
responsibility

ASJC Scopus subject areas

  • Law

Cite this

Officers' fiduciary duties and the nature of corporate organs. / Aviram, Amitai.

In: University of Illinois Law Review, Vol. 2013, No. 3, 18.07.2013, p. 763-784.

Research output: Contribution to journalArticle

@article{82fc1d9a99a0460c8c5f57b9a1334811,
title = "Officers' fiduciary duties and the nature of corporate organs",
abstract = "The nature of officers' fiduciary duties (and in particular whether the Business Judgment Rule applies to officers) is the subject of heated scholarly debaie and conflicting case law, This Ar{\^i}icle analyzes the question using a neglected conceptual {\^i}ool: the corporate organ. Corporate organs are bodies that act on behalf of the Corporation but are not subject to its control and thus are not governed by agency law (the board of directors is the prototypical organ). This Ar{\^i}icle argues that corporate organs differ from, and complement, the other type of corporate actor (corporate agents) in the allocation of discretion whether to approve acts that are in the fiduciary duty penumbra. For agents, this oversight function is given (o the beneficiary (the principal); for organs, it is given to judges. The nature of an officer's fiduciary duties depends on whether oversight by the beneficiary, or by judges, would maximize accountability. The answer differs between officers, so in contrast to the arguments of both sides of the debate, officers should not be uniformly classified as agents or organs, Such classification is best left to private ordering, Extant law allows for such private ordering but provides officers with an incentive to maintain an ambiguous status. This Article suggests tweaks to the law that would incentivize officers to seifselect their status as organs or agents.",
author = "Amitai Aviram",
year = "2013",
month = "7",
day = "18",
language = "English (US)",
volume = "2013",
pages = "763--784",
journal = "University of Illinois Law Review",
issn = "0276-9948",
publisher = "University of Illinois College of Law",
number = "3",

}

TY - JOUR

T1 - Officers' fiduciary duties and the nature of corporate organs

AU - Aviram, Amitai

PY - 2013/7/18

Y1 - 2013/7/18

N2 - The nature of officers' fiduciary duties (and in particular whether the Business Judgment Rule applies to officers) is the subject of heated scholarly debaie and conflicting case law, This Arîicle analyzes the question using a neglected conceptual îool: the corporate organ. Corporate organs are bodies that act on behalf of the Corporation but are not subject to its control and thus are not governed by agency law (the board of directors is the prototypical organ). This Arîicle argues that corporate organs differ from, and complement, the other type of corporate actor (corporate agents) in the allocation of discretion whether to approve acts that are in the fiduciary duty penumbra. For agents, this oversight function is given (o the beneficiary (the principal); for organs, it is given to judges. The nature of an officer's fiduciary duties depends on whether oversight by the beneficiary, or by judges, would maximize accountability. The answer differs between officers, so in contrast to the arguments of both sides of the debate, officers should not be uniformly classified as agents or organs, Such classification is best left to private ordering, Extant law allows for such private ordering but provides officers with an incentive to maintain an ambiguous status. This Article suggests tweaks to the law that would incentivize officers to seifselect their status as organs or agents.

AB - The nature of officers' fiduciary duties (and in particular whether the Business Judgment Rule applies to officers) is the subject of heated scholarly debaie and conflicting case law, This Arîicle analyzes the question using a neglected conceptual îool: the corporate organ. Corporate organs are bodies that act on behalf of the Corporation but are not subject to its control and thus are not governed by agency law (the board of directors is the prototypical organ). This Arîicle argues that corporate organs differ from, and complement, the other type of corporate actor (corporate agents) in the allocation of discretion whether to approve acts that are in the fiduciary duty penumbra. For agents, this oversight function is given (o the beneficiary (the principal); for organs, it is given to judges. The nature of an officer's fiduciary duties depends on whether oversight by the beneficiary, or by judges, would maximize accountability. The answer differs between officers, so in contrast to the arguments of both sides of the debate, officers should not be uniformly classified as agents or organs, Such classification is best left to private ordering, Extant law allows for such private ordering but provides officers with an incentive to maintain an ambiguous status. This Article suggests tweaks to the law that would incentivize officers to seifselect their status as organs or agents.

UR - http://www.scopus.com/inward/record.url?scp=84880066772&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84880066772&partnerID=8YFLogxK

M3 - Article

AN - SCOPUS:84880066772

VL - 2013

SP - 763

EP - 784

JO - University of Illinois Law Review

JF - University of Illinois Law Review

SN - 0276-9948

IS - 3

ER -