There’s no questioning the current power of the duty of loyalty to correct bad corporate actors or dissuade directors from self-dealing. But, as this article will show, that is only half of the story. For the better half of the last century, corporate jurisprudence has become so bogged down in the minutia of individual instances of impaired shareholder interests that it has stopped asking: “To whom is the director loyal?” Though only infrequently evidenced in modern corporate case law, the duty of loyalty is – as originally intended – far more robust than it currently appears and, given the frightfully delicate and fearful global economic climate, this “maximum condition” of the duty of loyalty may be emerging just in time. Through the use of a creative and uncannily familiar hypothetical predicated upon real facts, this article will show how stealthy but forceful foreign investments by increasingly hostile sovereigns may soon require the force of this affirmative duty of loyalty to combat problems we never even saw coming.
In the twenty-first century, the issue of corporate directors’ and officers’ fiduciary duties has been viewed primarily from the single, corrective vantage of corralling bad actors and enforcing the rights of duped shareholders against the greedy helmsmen that ran many a corporate vessel aground in the choppy economic swells of the past decade. Thanks in part to supporting federal regulation like the Sarbanes-Oxley act – created in response to the overwhelming corporate greed of the Enron and WorldCom fiascos – the public outcry against corporate malfeasance by self-interested directors and officers had all but settled to a quiet din before the most recent financial crisis of 2008 and, later, the current Occupy Wall Street protests ignite(d) passionate calls for greedy, bald heads to roll.
This dissentient perspective of the fiduciary duties of corporate officers and directors is, therefore, seemingly bona fide in light of these recent events; ostensibly overwhelming any competing conceptions for the application of the fiduciary duties beyond the cases for corralling bad actors which have thus far dominated the case law on these issues. However, by stepping outside the fray that is America’s internal Wall Street v. Main Street Battle Royale and focusing on mounting external pressures from the growing economies of developing countries that do not suffer the pesky imposition of legislated morality, one may find potential opportunities for these duties – and the duty of loyalty in particular – to be applied in affirmative ways rarely before contemplated by the courts.
Despite its unfortunate omission from the bulk of Delaware case law regarding duty of loyalty breaches, the affirmative thrust of the duty of loyalty has been recognized by the Court for over 130 years. This fleeting fiduciary duty condition has since eroded from our common conception of loyalty, and must be wrenched from the bowels of judicial Elba in order to once again fulfill the robust notion of loyalty, as originally intended. This affirmative application opens up the possibility for a myriad of new corporate conflicts that cross not only borders, but also our understanding of how and why American public policy considerations originally created these duties.