Agency Commons^™

The Lost Promise Of Private Ordering, Cathy Hwang, Yaron Nili, Jeremy Mcclane

Faculty Scholarship

The agency problem is corporate law’s most enduring challenge: when corporate managers spend investors’ money, how does the law protect investors from reckless management? Scholars of law, finance, and accounting have suggested that in one corner of corporate law—corporate debt—a powerful tool exists to mitigate the agency problem. Specifically, through loan covenants, lenders can force borrowers to comply with lenders’ preferences, thereby mitigating the agency problem in lending.

But loan covenants are disappearing. Over the last decade, loan covenants have become fewer and skinnier, and so called “covenant-lite” or “cov-lite” loans have become dominant. If loan covenants do such a …

Agents And Advisors, Deborah A. Demott

Faculty Scholarship

No abstract provided.

Brief Of Amica Curiae Deborah A. Demott In Support Of Petitioner, Deborah A. Demott

Faculty Scholarship

No abstract provided.

Mind The Gap: A Comparative Approach For Fixing Volcker, Learning From Liikanen, And Using Vickers To Repair The U.S. Banking System, Rachel Sereix

Duke Journal of Constitutional Law & Public Policy Sidebar

After the 2008 financial crisis, Congress, courts, and international banking agencies alike determined that their current banking infrastructures were inadequate to prevent such crises in the future. The Dodd-Frank Wall Street Reform Acttried to solve the problem by reducing derivatives-related risk through legislative provisions that increased capital and liquidity requirements for all banks. Yet, banks continued to find means to subvert the system and Congress remained relatively silent on the issue after the passage of Dodd-Frank—failing to amend Dodd-Frank in any meaningful way. Looking towards European peers for guidance about how to reform the United States’ banking regime has often …

Fiduciary Duties On The Temporal Edges Of Agency Relationships, Deborah A. Demott

Faculty Scholarship

The duties that principals and agents owe each other are typically coterminous with the agency relationship itself. But sometimes temporal lines of clean demarcation do less work. The Chapter identifies situations in which an agent may owe duties—including fiduciary duties—to the principal prior to the formal start of their relationship, including any enforceable contract between the parties. Likewise, not all duties that agents and principals owe each other end with the relationship. The Chapter explores the rationales for duties at the temporal peripheries for an agency relationship and the extent to which they are derived from doctrines distinct from agency …

The Domains Of Loyalty: Relationships Between Fiduciary Obligation And Intrinsic Motivation, Deborah A. Demott

Faculty Scholarship

Recent scholarly inquiry into fiduciary law predominantly focuses on whether the subject is a coherent field and not a piecemeal assortment of doctrinal detail. This Article looks to the future and to relationships between the formal domain of fiduciary law and other factors that shape conduct. These include intrinsic motivation, markets for professional services, and forces like the operation of reputation. The Article demonstrates that looking across domains, from the legal to the extralegal, casts in sharp relief the reasons why fiduciary law is distinctive. These stem from the specific qualities of relationships to which fiduciary law applies, as well …

Competing For Votes, Kobi Kastiel, Yaron Nili

Faculty Scholarship

Shareholder voting matters. It can directly shape a corporation’s governance, operational and social policies. But voting by shareholders serves another important function—it produces a marketplace for votes where management and dissidents compete for the votes of the shareholder base. The competition over shareholder votes generates ex ante incentives for management to perform better, to disclose information to shareholders in advance, and to engage with large institutional investors.

Traditional corporate law has looked to a variety of “market forces” as a means of curbing the agency costs of public corporations. Yet, for various reasons, these market forces are, at best, an …

Tepoel Lecture: Bond Trustees And The Rising Challenge Of Activist Investors, Steven L. Schwarcz

Faculty Scholarship

No abstract provided.

The Conflicted Advice Problem: A Response To Conflicts & Capital Allocation, Gina-Gail S. Fletcher

Faculty Scholarship

No abstract provided.

Fiduciary Principles In Agency Law, Deborah A. Demott

Faculty Scholarship

No abstract provided.

Corporate Officers As Agents, Deborah A. Demott

Faculty Scholarship

Although officers are crucial to corporate operations, scholarly and theoretical accounts tend to slight officers and amalgamate them with directors into a single category, "managers." This essay anchors officers within the common law of agency-as does black-letter law-which crisply differentiates officers from directors. Understanding that agency is central of the legal account of officers' positions and responsibilities is crucial to seeing why, like directors, officers are fiduciaries, but distinctively so, not as instances of generic "corporate fiduciaries." Officers, like directors, owe duties of loyalty, but also particularized duties of care, competence, and diligence. Additionally, officers' duties of performance encompass two …

Accessory Disloyalty: Comparative Perspectives On Substantial Assistance To Fiduciary Breach, Deborah A. Demott

Faculty Scholarship

Culpable participation in a fiduciary's breach of duty is independently wrongful. Much about this contingent form of liability is open to dispute. In the United States, well-established general doctrine defines the elements requisite to establishing accessory liability, which is categorized as a tort and often referred to as "aiding-and abetting" liability. What's controversial is how the tort applies to particular categories of actors, most recently investment banks that advise boards of target companies in M&A transactions. In the United Kingdom, in contrast, accessory liability in connection with a breach of trust or fiduciary duty is controversial because the law is …

Culpable Participation In Fiduciary Breach, Deborah A. Demott

Faculty Scholarship

This essay makes a case for the salience of tort law to fiduciary law, focusing on actors who culpably participate in a fiduciary's breach of duty, whether by inducing the breach or lending substantial assistance to it. Although the elements of this accessory tort are relatively settled in the United States, how the tort applies to particular categories of actors-most recently investment bankers who serve as M&A advisors-provokes controversy. The paper also explores the less developed terrain of primary actors who breach governance duties that are not fiduciary obligations because the entity's organizational documents eliminate fiduciary duties, as Delaware law …

Fiduciary Breach, Once Removed, Deborah A. Demott

Faculty Scholarship

No abstract provided.

Defining Agency And Its Scope (Ii), Deborah A. Demott

Faculty Scholarship

Fiduciary law necessarily raises issues of delineation and demarcation, which this paper demonstrates through examples involving common-law agents. Serving as an agent, and thus as a fiduciary, does not necessarily mean that agency law prescribes all duties that the agent owes the principal. The agent may have rights external to the relationship that the agent may exercise, distinct from the duty of loyalty owed the principal. When an agent acts outside the bounds of an agency relationship, the principal’s consent is not requisite to conduct that would constitute disloyalty within the bounds of the agency relationship. The paper illustrates the …

Agency In The Alternatives: Common-Law Perspectives On Binding The Firm, Deborah A. Demott

Faculty Scholarship

This chapter in a forthcoming book examines the external aspects of agency law in the context of unincorporated firms, that is, the capacity of actors associated a firm to bind it to the legal consequences of interactions with third parties. The chapter focuses in particular on the impact of acts done by a representative for which the representative lacked actual authority. The chapter differentiates the terminology and concepts associated with partnership law from the common law of agency, in particular, a partner's capacity to bind the firm albeit the partner lacks actual authority, which the chapter terms the partner's "positional …

Forum-Selection Bylaws Refracted Through An Agency Lens, Deborah A. Demott

Faculty Scholarship

Both praise and controversy surround director-adopted bylaws that affect shareholders' litigation rights. Recent bylaws specify an exclusive forum for litigation of corporate governance claims, limit shareholder claims to resolution through arbitration, and (most controversially) impose a one-way regime of fee shifting on shareholder litigants. To one degree or another, courts have legitimated each development, while commentators differ in their assessments. This Article brings into clear focus issues so far blurred in debates surrounding these types of bylaws. Focusing on forum-selection bylaws, and on Delaware precedents, I argue that beginning from the standpoint of common law agency reveals the attenuated and …

Relationships Of Trust And Confidence In The Workplace, Deborah A. Demott

Faculty Scholarship

No abstract provided.

The Contours And Composition Of Agency Doctrine: Perspectives From History And Theory On Inherent Agency Power, Deborah A. Demott

Faculty Scholarship

This Essay explores the history of formulations of agency doctrine, arguing that agency law can best be rationalized as a distinctive subject by recognizing that an agent acts as an extension of the principal. The Essay relies on historical material related to the drafting of the Restatements of Agency, the disagreements among Reporters and other participants about the contours agency law, and the intellectual backdrop against which these experts worked. Their disputes, preceded as they were by challenges to the fundamental coherence of agency law, led to successive formulations of agency doctrine; while attempting to provide a comprehensive level of …

Cheating On Their Taxes: When Are Tax Limitations Effective At Limiting State Taxes, Expenditures, And Budgets?, Colin H. Mccubbins, Mathew D. Mccubbins

Faculty Scholarship

No abstract provided.

The Monitor-Client Relationship, Veronica Root

Faculty Scholarship

After the government discovers wrongdoing by a corporation, the corporation and the government often enter into an agreement stating that the corporation will retain a “monitor.” A corporate compliance monitor, unlike the gatekeeper, is not charged with “monitoring” the corporation in an attempt to detect and prevent wrongdoing. A monitor, unlike the probation officer, is not solely charged with ensuring that the corporation complies with a previously determined set of requirements. Instead, a corporate compliance monitor is responsible for (i) investigating the extent of the wrongdoing already detected and reported to the government, (ii) discovering the cause of the corporation’s …

The Fiduciary Character Of Agency And The Interpretation Of Instructions, Deborah A. Demott

Faculty Scholarship

This chapter in a forthcoming book justifies the conventional characterization of common-law agency as a fiduciary relationship. An agent serves as the principal’s representative in dealings with third parties and facts about the world, situating the agent as an extension of the principal for legally-salient purposes. A principal’s power to furnish instructions to the agent is the fundamental mechanism through which the principal exercises control over the agent, a requisite for an agency relationship. The agent’s fiduciary duty to the principal provides a benchmark for the agent’s interpretation of those instructions. The chapter draws on philosophical literature on the identity …

Restatements And Non-State Codifications Of Private Law, Deborah A. Demott

Faculty Scholarship

This paper offers a vantage point through which to assess the phenomenon of projects codifying private law that are undertaken by private persons or institutions, distinct from legislatures and state-sponsored codification and law-revision projects. The private institution on which this paper focuses is the American Law Institute (ALI). ALI works in statutory form—most notably the Uniform Commercial Code and the Model Penal Code—as well as through projects that generate “Principles” to guide legal development within their specific fields and “Restatements” that authoritatively cover the law in a field.

The history of the Restatements sketched in this essay fits within the …

Further Perspectives On Corporate Wrongdoing, In Pari Delicto, And Auditor Malpractice, Deborah A. Demott

Faculty Scholarship

No abstract provided.

The Milieu Of The Boardroom And The Precinct Of Employment, Deborah A. Demott

Faculty Scholarship

This Commentary explores differences between employer-employee relationships and service on a board of directors. Against this backdrop, this Commentary argues that the research findings surveyed by Brooke and Tyler (Jennifer K. Brooke & Tom R. Tyler, Diversity and Corporate Performance: A Review of the Psychological Literature, 89 N.C. L. REV. 715 (2011)), although specific to the employment context, may be salient in assessing the impact of diversity among members of a board of directors.

Brief Of Amica Curiae, Deborah A. Demott In Support Of The Petitioner, Maples V. Thomas, Deborah A. Demott

Faculty Scholarship

No abstract provided.

Fiduciaries With Conflicting Obligations, Steven L. Schwarcz

Faculty Scholarship

This Article examines the dilemma of a fiduciary acting for parties who, as among themselves, have conflicting commercial interests - an inquiry fundamentally different from that of the traditional study of conflicts between fiduciaries and their beneficiaries. Existing legal principles do not fully capture this dilemma because agency law focuses primarily on an agent’s duty to a given principal, not on conflicts among principals; trust law focuses primarily on gratuitous transfers; and commercial law generally addresses arm’s length, not fiduciary, relationships. The dilemma has become critically important, however, as defaults increase in the multitude of conflicting securities (e.g., classes of …

Art Deaccessions And The Limits Of Fiduciary Duty, Sue Chen

Duke Law Student Papers Series

Art deaccessions prompt lawsuits against museums, and some commentators advocate using the stricter trust standard of care, instead of the prevailing corporate standard (business judgment rule), to evaluate the conduct of non‑profit museum boards. This Article explores the consequences of adopting the trust standard by applying it to previously unavailable deaccession policies of prominent art museums. It finds that so long as museum boards adhere to these policies, their decisions would satisfy the trust standard. This outcome illustrates an important limitation of fiduciary law: the trust standard evaluates procedural care but cannot assess deaccessions on their merits. Yet this limitation, …

Ratification: Useful But Uneven, Deborah A. Demott

Faculty Scholarship

Ratification permits a principal to determine to be bound by the legal consequences of action taken by an agent after the fact of the agent’s conduct when the principal would otherwise not be bound. By ratifying a principal may clarify the effects of uncertainty, furnishing reassurance to the agent, the third party with whom the agent dealt, and other parties interested in the status of the transaction. However, at the point the principal decides whether to ratify, the principal knows facts not known to agent and third party at the time of the agent’s unauthorised transaction, in particular subsequent developments …

The Restatement (Third) Of Agency And The Unauthorised Agent In Us Law, Deborah A. Demott

Faculty Scholarship

No abstract provided.