Towards a Federal Fiduciary Standards Act, 30 Cleveland State Law Review 203 (1981)
Viewed from a distance, there is something surprising about the
fact that the legal standards that govern the conduct of corporate
managers -directors, officers and controlling stockholders -differ in
their source and origin depending on whether one is speaking of relations
with the company itself or of relations with its security holders. At
the security holder level, it is of course the federal securities statutes
that have primary effect. Federal proxy and insider trading rules,
together with federal disclosure requirements, are the prevailing constraints
where relations between managers and investors are concerned.
At the company level, by contrast, it is the statutory and common
law of the state of incorporation that chiefly governs. Fiduciary
limitations on dealings between the company and those who manage or
control the disposition of its property have long been reserved to the
states, of which Delaware, being the principal state of incorporation, is
the most important. In effect, then, despite the economic identity that
exists between the firm and its security holders, fiduciary obligation is
at present dichotomized between federal and state legal systems which
have no very close connection to one another; the federal system
dominates the security holder level while the various state systems
dominate at the firm level.
Date of Authorship for this Version
Chirelstein, Marvin A., "Towards a Federal Fiduciary Standards Act" (1981). Faculty Scholarship Series. Paper 4783.