Yearly Archives: 2025

Since my days at the SEC in the 1970s and 1980s and my academic career that started shortly thereafter, it was gospel that corporate directors and officers are fiduciaries. Indeed, that perception has been a fundamental aspect of corporate lore for centuries and remains vibrant today. This belief, however, is not based on reality. Indeed, identifying corporate directors and officers as fiduciaries is a misnomer.

My just published Oxford University Press book Corporate Director and Officer Liability — “Discretionaries” Not Fiduciaries seeks to instill reality into the corporate governance framework with respect to the liability of these individuals. Insofar as I am aware, this is the first source to advocate for the removal of fiduciary status for directors and officers. In its stead, these individuals should be deemed “discretionaries.”  This neutral term accurately portrays the status of corporate directors and officers who are held to varying standards of liability depending on the applicable facts and circumstances.

That is not to say that fiduciary standards are nonexistent. Indeed, it is true that in certain situations meaningful fiduciary standards apply to director and officer liability exposure. For example, in an interested director transaction that is neither approved by independent directors nor disinterested shareholders, the entire fairness test prevails. As another example, in a going-private transaction where the parent corporation engages in a cash-out merger transaction eliminating its subsidiary’s minority shareholders, the entire fairness test likewise applies unless there was effectively implemented an independent and competent special negotiation committee as well as approval by an adequately informed uncoerced minority vote.

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