Director Confidentiality

The Corporate Directors Guidebook contains the bare proposition that a director must keep confidential all matters involving the corporation that have not been disclosed to the public. Moscow explores the need to modify the flat recitation of a rule of director confidentiality in light of the limited authority for a blanket restriction, and the necessary exceptions in the business contexts in which the issue arises. In particular, many situations do not involve damage to the corporation, or there is express or implied consent to the sharing of information

Corporate Officers and the Business Judgment Rule

This article argues that the business judgment rule - a cornerstone concept in corporate law - does not and should not extend to corporate officers in the same broad manner in which it is applied to directors. The argument proceeds along both descriptive and normative lines. After first reviewing judicial decisions, the article concludes that, notwithstanding frequent, broad assertions to the contrary, application of the rule to corporate officers is not firmly established in case law. The article next examines the policy case by assessing three conventional rationales for applying the rule to directors and concluding, on balance, that the rationales do not fully translate into the officer context. The upshot is that courts should more closely scrutinize officer conduct than they now examine director performance. Those companies not wishing to expose officers to heightened liability risks may, by decision of the board of directors, refrain from asserting rightful claims ex post, or may contract around that risk ex ante, either by eliminating liability altogether or substantially reducing it

Fuzzy Logic and Corporate Governance Theories

[Excerpt] “Fuzzy logic is a theory that categorizes concepts or things belonging to more than one group. A methodology that explains how things function in multiple groups (not fully in one group or another) offers advantages when no one definition or membership in a group accounts for belonging to multiple groups. The principal/agent model of corporate governance has some characteristics of fuzzy logic theory. Under traditional agency theory of corporate governance, shareholders, directors, and senior corporate officers each belong to groups having multiple attributes. In the principal/agent model of corporate governance, shareholders are owners or principals; directors are shareholders and agents of the corporation; and senior corporate officers are directors’ agents, shareholders’ agents, and agents of the corporation. Each one functions within multiple groups serving multiple agency roles, and each owes fiduciary duties that vary depending on whose agent they are functioning as. Such a multi-dimensional role for corporate actors is a consequence of multi-definitional corporate purpose within agency theory of governance. This multi-dimensional group membership is not easily reconciled within agency theory and is therefore not always explained. However, traditional corporate governance theory can borrow another basic tenet of fuzzy logic theory. Fuzzy theory not only accounts for membership in multiple groups, but also explains how things work because they are multidimensional or ambiguous. This article seeks to explain the ambiguities of corporate governance theory and suggests a framework that accounts for the multi-agent role of senior corporate officers of public companies. It offers a kind of fuzzy logic theory for understanding the fiduciary duties of senior officers. The purpose of this article is to evaluate other models of corporate governance that account for the multi-agent role of senior officers of public companies and assess the ability of various models to hold senior officers accountable to the corporation.