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by colonelanguz
2189 days ago
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Certainly it has been enforced against a company (thousands of them), but in a way it is more of a hypothetical threat. I was not referring to a statutory law, but rather to fiduciary duties, which derive from the common law of equity. The quotation from the Hsu case I provided above is a clear depiction of the standard of conduct required of directors and officers of Delaware corporations. But in reality, fiduciary standards operate more like you suggested—as a hypothetical threat. The reason for this is that, although the standards of conduct demanded of Delaware directors and officers are onerous and exacting, the standard of judicial review of challenged conduct is ordinarily very relaxed. In most ordinary situations, the standard of review is the business judgment rule, which essentially punts on the question of whether a particular action violates a fiduciary duty. The idea is that courts do not supplant directors' judgment with their own. More onerous standards of review are available in other situations, such as mergers and transactions where an interested party sits on the board or is an executive. (Facebook is an interesting example of a controlled company, given Zuckerberg's ownership stake, and its decisions might be subject to more scrutiny, but procedural safeguards are generally available to cleanse even conflicted decisionmaking.) It's worth clarifying that only those to whom fiduciary duties are owed can ever sue for damages resulting from their breach. In other words, shareholders. That's how the threat gets operationalized—by a shareholder or class of shareholders suing the corporation for failing to maximize shareholder value through a fiduciary breach. Anyways, the point I really wanted to make is that shareholder value maximization really is meaningfully encoded in American corporate law. If you meant to suggest that reality is less black-and-white than that, then I hope the foregoing ramble confirms that you are correct! |
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