Law Commons^™

Managers' Fiduciary Duty Upon The Firm's Insolvency: Accounting For Performance Creditors, Alon Chaver, Jesse M. Fried

Vanderbilt Law Review

A corporation's managers generally owe a fiduciary duty to the corporation and its shareholders. Legal scholars interpret this duty as requiring the managers to maximize shareholder value. When a firm is solvent, the obligation to maximize shareholder value tends to give managers an incentive to deploy firm assets efficiently-that is, in a way that maximizes total value.

When a firm is insolvent, however, the duty to maximize shareholder value could lead managers to take actions that reduce the value of debt more than they increase the value of equity and therefore reduce total value. Accordingly, a number of courts have …

The Critical Resource Theory Of Fiduciary Duty, D. Gordon Smith

Vanderbilt Law Review

This Article proposes a new theory to unify the law of fiduciary duty. The prevailing view holds that fiduciary law is atomistic, arising for varied reasons in established categories of cases (such as trustee-beneficiary and director-shareholder) and ad hoc in relation- ships where one person trusts another and becomes vulnerable to harm as a result. By contrast, the critical resource theory of fiduciary duty holds that every relationship properly designated as "fiduciary" conforms to the following pattern: One party (the "fiduciary') acts on behalf of another party (the "beneficiary') while exercising discretion with respect to a critical resource belonging to …