The Path of Fiduciary Law

Abstract

Contemporary accounts of corporate legal evolution view lawmakers as highly responsive to the economic interests of both pressure groups and markets. Through this lens law is understood to be the product of pressures exerted by managers, investors, institutional shareholders and the Federal Government, and the incentives of state lawmakers to accommodate the interests of these pressure groups. This lens dominates our current understanding of corporate legal evolution in the United States and is becoming highly influential in comparative accounts of corporate legal variation. This article sounds a note of objection. The article argues that the disciplinary pendulum has swung too far toward external accounts of legal evolution and too far away from internal accounts of legal change which view the path of law, at least in part, as the product of the internally generated constraints of the legal system – the relative autonomy of the law. To make this argument, the article considers the internal constraint of the conception of the corporation in 19th century US and UK corporate law and the evolution of self-dealing law in these two jurisdictions. It shows how two jurisdictions that started from the same legal proposition about self-dealing diverged rapidly as a result of the interaction of this proposition with profoundly different conceptions of the corporation. Contrary to the dominant account of the evolution of self-dealing law in the United States, the contemporary self-dealing rule is not the legally unexplained product of external market pressures but the logical and consistent product of the path of fiduciary law trodden through the corporate conception. The article shows that for contemporary corporate law a significant dose of inevitability was administered at the inception of general incorporation.