What we talk about when we talk about fiduciary duties: the changing role of a legal theory concept in corporate governance studies

Abstract

ABSTRACTCorporate law, as a constitutive law in the corporate system, includes the legal theory concept of fiduciary duties. Fiduciary duty law prescribes that a fiduciary should act in the interest of the beneficiary and without self-interest. Fiduciary law, even its proponents admit, is quite complicated to pin down into statutes, and yet it serves many ends in society. In the field of corporate governance, fiduciary law has been challenged by contract law and contractual relations. The proponents of the contractual theory of the firm suggest that contracts more effectively monitor and reduce agency costs, and discipline managers to act in the interest of shareholder, i.e. eo ipso, generate net economic welfare. The article examines how corporate legislation has been reinterpreted overtime, and how legal concepts such as contracts and fiduciary duties have to a varying degree been invoked in the corporate governance literature. In the current regime of shareholder primacy governance, fiduciary is a legal device that can be reintroduced to handle concerns regarding governance issues.