"Unlike ideals of corporate governance, a fiduciary's duties do not change over time." (2)
"Times may change, but fiduciary duties do not." (3)
These statements seem to have been intended to highlight the fact that Delaware is not going to create new avenues of liability to satisfy the post-Enron reformist impulse. Nevertheless, the notion that fiduciary duties are constant seems wildly out of place in this case, when all of us were wondering what to make of the duty of good faith and Chancellor Chandler is writing sentences like this: "The Delaware Supreme Court has been clear that outside the recognized fiduciary duties of care and loyalty (and perhaps good faith), there are no other fiduciary duties."
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1. Posted by KipEsquire on August 10, 2005 @ 5:25 | Permalink
"Times may change, but fiduciary duties do not."
The fiduciary duty of money managers has changed dramatically over time. It was once considered per se breach of fiduciary duty to invest trust funds in any stocks under any circumstances ("too risky -- they might go down"). Some states then allowed an "approved list" of blue chip stocks that were considered "permissible" equity investments. Today, the law accepts the premises of Modern Portfolio Theory and managing for total return.
2. Posted by Eh Nonymous on August 10, 2005 @ 7:41 | Permalink
What Kip is pointing out that the _form_ of the fiduciary duty - to deal with the beneficiary's money as they would prudently do with their own - is not what's really changed; the definition of "prudently" has been modified as the substance of what the law believes Can Prudently Be Done has shifted.
So, of course _what a fiduciary can get away with_ will be modified by what they know and when. A prudent fiduciary after Worldcom and Enron should have considered the presence (or absence) of an independent audit board at any major company it invests in- but now the option's taken away.
Board independence, and companywide compliance with statutory and regulatory rules, are two other areas where a prudent fiduciary investing in stock of a company would have to think hard about the implication of putting money in a "top performer" with hidden weaknesses.
When it comes to executive compensation, I'm a huge skeptic- but then, consider the source; I've never been on the other side of the fence.
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