A Narrow View of Transnational Fiduciary Law

Fiduciaries frequently confront transnational situations. Yet, even as people, products, and capital have become more mobile, scholars have until recently given little attention to the transnational dimensions of fiduciary law.This chapter conceptualizes transnational fiduciary law, a term that marries the fields of fiduciary and transnational law. It identifies two primary understandings of the concept and explores their scope and possible content.Under the first interpretation of this composite concept, the term transnational qualifies what fiduciary scholars have conventionally understood as fiduciary law. Transnational fiduciary law, on this view, encompasses the application of fiduciary law to transnational problems and situations. Under the second interpretation, transnational fiduciary law refers not to fiduciary law as applied in transnational contexts but rather to transnational law governing the conduct of fiduciaries. Transnational law lacks a universally accepted definition. Nevertheless, here we seek some wider notion of a “legal order” that is said to govern the behavior of parties operating within it. As such, this second understanding largely encompasses the first interpretation but extends more broadly to include norms, contractual constraints, customary practices, official guidance, and assorted voluntary schemes all of which might achieve similar objectives to fiduciary law.In this chapter, I argue that scholarly attention to the transnational dimensions of fiduciary law ought in most instances to be bounded by the first interpretation. Fundamentally, I question whether transnational law governing fiduciaries generally can be equated with fiduciary law at all without causing significant confusion. Fiduciary duties are distinctive in ways that prevent non-fiduciary law—to say nothing of vague and shifting norms—from serving as substitutes. Another difficulty with the second interpretation is that legal norms and practices that appear to serve similar functions as fiduciary law may be rarely stated and therefore difficult to verify. When they are stated, they may be vague and provisional, making it hard to determine whether transnational fiduciary law in this second sense exists at all in practice. The chapter provides case studies illustrating the difficulty of isolating the second interpretation, except as it reduces to the first through its incorporation of fiduciary law applied in transnational contexts.I do not claim that the transnational dimensions of fiduciary law are irrelevant. Nor do I reject the importance of transnational law or transnational legal ordering. However, I suggest that we treat transnational fiduciary law as an application of fiduciary law rather than as a field deserving independent study, at least until we can establish that transnational fiduciary law—on the first interpretation—is itself distinct from fiduciary law

M&A Advisor Misconduct: A Wrong Without a Remedy?

Merger and acquisition ( M&A ) transactions are among the most high profile of corporate transactions. They are also among the most contentious, with around eighty percent of all completed deals litigated in recent years. And yet investment banks—essential advisors on these deals—have generally succeeded spectacularly in avoiding liability, an anomaly considering the routine nature of deal litigation and the frequency with which they face lawsuits in their other activities. This article examines this anomaly, explaining the doctrinal and practical reasons why it arises. In doing so, it puts in context aiding and abetting liability, a recently-successful shareholder strategy to bring M&A advisors to heel. The article shows how this litigation strategy—a direct action by shareholders alleging secondary liability against the corporation\u27s M&A advisor based on the underlying wrong of directors—may delicately side-step the traditional obstacles. This strategy has succeeded on occasion, provoking widespread alarm in the investment banking community—but the strategy marks only a modest increase in liability risk for M&A advisors. In fact, the liability framework for M&A advisors remains piecemeal and unlikely to be effective in deterring M&A advisor misconduct. The article concludes by examining reform options, arguing in favor of greater industry self- regulation

The Foundations of Anglo-American Corporate Fiduciary Law

How does legal doctrine form, why does it change, and why do doctrines with a common starting point, in legal systems with a shared heritage, diverge? This essay reviews and critiques a book by David Kershaw that addresses these questions. The book charts the evolution of corporate fiduciary law in the United Kingdom and United States and, comparing the two systems, explains how and why the respective legal regimes evolved as they did. Kershaw weighs in on contested U.S. scholarly debates, confronting the common claim that doctrinal change is less the product of internal logic or strict precedent than a response to extra-legal factors, including interest group politics, policy concerns, and state competition for corporate charters. Kershaw rejects this claim, offering other, provocative accounts for the production of U.S. corporate fiduciary law and for Delaware’s lead in attracting incorporations

Proxy Advisor Influence in a Comparative Light

The reform of proxy advisors is on the U.S. regulatory agenda, with debate focusing on the extent of influence that these actors exert over institutional investors and corporate managers. But the debate examines the U.S. position in isolation from other systems. If we broaden our focus, we see that the factors usually cited for proxy advisors’ influence exist similarly in the United Kingdom but that proxy advisors there exert significantly weaker influence than they do in the United States. Why this difference when we would expect a similar role for proxy advisors in both systems based on the presence of the usual explanatory factors? This article examines this question, identifying other explanations — the role of institutional investor trade groups, the level of agreement on governance best practices, the strength of shareholder rights, and the role of the State — to help explain proxy advisors’ greater influence in the United States. The article then explores the implications of this analysis for proxy advisor reform in the United States

Reassessing Self-Dealing: Between No Conflict and Fairness

Scholars have long disagreed on which of two rules is more effective when a fiduciary engages in self-dealing. Some defend the “strict” no-conflict rule, which categorically bans self-dealing. Others prefer the “flexible” and “pragmatic” fairness rule, which allows self-dealing if it is fair to beneficiaries. The centrality of this debate cannot be overstated: corporate law as a field is fundamentally concerned with self-dealing by fiduciaries. Yet a lack of firm data means that this debate has dragged on for decades, with no end in sight. This Article makes a simple but powerful point: the entire debate is somewhat misguided because, in operation, the difference between the two regimes is not as important as scholars generally assume. This is best seen by comparing the operation of the United Kingdom—which continues to employ the traditional no-conflict rule—with the United States, which adopted the fairness rule. The no-conflict and fairness rules share a common structure: they require strict loyalty but provide exceptions or cleansing devices that save fiduciaries from liability. Only the no-conflict rule allows companies to adopt their own exceptions. Based on this analysis, neither rule is self-evidently stricter or more pragmatic. In fact, examining the fiduciary rules in operation, including the exceptions that companies actually adopt and directors actually use, reveals that they are quite similar in operation. Both task neutral directors with policing directorial self-dealing. This finding underscores the need for scholars and policymakers alike to focus not on the choice between no conflict and fairness but rather on the best use of exceptions or cleansing devices. The availability of proof of fairness as a cleansing device in the United States occasionally matters—but far less than commentators have claimed. It is often irrelevant because of its severity, rather than relevant because of its leniency. More attractive exceptions are usually available to self-dealing directors. This finding also complicates the dominant narrative holding that U.S. law significantly weakened as it evolved from no conflict to fairness; far from rejecting a stricter U.K. law, U.S. law came more closely to resemble U.K. law in operation

Introduction: The Rise of Fintech

The use of technology has long accompanied the provision of financial products and services. In the late 1950s, financial institutions turned to information technology to help settle and record transactions, a burden that had grown with the surging volume of securities trades. These changes have only accelerated in recent years. Technology giants—the likes of Amazon, Apple, Facebook, and Google—are entering financial services, beginning to offer credit cards and currencies as they attempt to push more fully into retail banking. This volume of the Washington University Journal of Law and Policy examines fintech, focusing on the regulatory and other challenges it poses. The symposium benefits from contributions by prominent scholars of financial and securities regulation. These contributions examine the structure of firms and markets, considering fintech activities occurring within existing firms and regulatory perimeters and activities that spill over the boundaries we currently take for granted

Managing Management Buyouts: A US-UK Comparative Analysis

This chapter comparatively assesses U.S. and U.K. law governing management buyouts (MBOs), focusing on the duties of directors and officers in these systems. The analysis casts doubt on persistent but mistaken perceptions about U.S. and U.K. corporate fiduciary duties for self-dealing. The U.K. no-conflict rule is seen as strict, the U.S. fairness rule as flexible and pragmatic. As the analysis for MBOs demonstrates, these fiduciary rules operate similarly, tasking neutral or disinterested directors with policing self-dealing, enabling commercially sensitive responses to conflicts of interest. The analysis also reveals stronger formal private enforcement of corporate law and more robust disclosure rules in the United States. But because the available empirical evidence fails to justify broad claims that corporate fiduciaries’ misconduct is more severe under either regime, the analysis identifies U.K. law-related measures that may serve similar functions to formal enforcement and mandated disclosure in constraining misconduct by corporate fiduciaries. These include informal enforcement by the U.K. Takeover Panel, stronger shareholder rights, and potentially greater monitoring by institutional investors

Comments on Proposed Rules for Special Purpose Acquisition Companies, Shell companies, and Projections

In March 2022, the Securities and Exchange Commission released proposed rules for special purpose acquisition companies (SPACs), shell companies, and projections. In this comment letter, filed with the SEC, I provide a critical assessment of this proposal.The SEC proposed far-reaching changes intended to enhance investor protections and align disclosure and liability rules in de-SPACs more closely with those in traditional IPOs. An under-appreciated feature of the proposed reforms is that they would subject de-SPACs to provisions closely modeled on Rule 13e-3 of the Exchange Act, which applies to going-private transactions, including management buyouts. Intended to tackle potential conflicts of interest and other abuses, Rule 13e-3 requires extensive disclosures about the substantive fairness of going-private transactions and must be carefully navigated by transaction planners. Although I discuss other aspects of the proposed reforms, I focus on provisions modeled on Rule 13e-3, arguing that the most onerous of these provisions ought to be applied more selectively, to those de-SPACs posing the greatest risk of conflicts (or dilution), or not at all

A General Defense of Information Fiduciaries

Countless high-profile abuses of user data by leading technology companies have raised a basic question: should firms that traffic in user data be held legally responsible to their users as “information fiduciaries”? Privacy legislation to impose fiduciary-like duties on data collectors enjoys bipartisan support but faces strong opposition from scholars. First, critics argue that the information-fiduciary concept flies in the face of fundamental corporate law principles that require firms to prioritize shareholder interests over those of consumers. Second, it is said that the overwhelming self-interest of large technology companies makes fiduciary loyalty impossible as a practical matter from the outset. This Essay finds neither objection convincing. The first objection rests on a mischaracterization of corporate law, which in reality would require compliance with user-regarding fiduciary obligations—the opposite of what critics fear. The second objection fails to convince because fiduciary law has proven itself adaptable enough to survive such challenges in other settings, such as in the asset management industry. The second objection nevertheless reveals a need for greater specificity of the scope and intensity of fiduciary duties that would be imposed under the information fiduciary model. Even so, neither objection plausibly undermines the model