Fiduciary Duties of Corporate Responsible Persons and the Construction of the Standard of Judicial Review —Starting from the Business Judgment Rule
Date Issued
2012
Date
2012
Author(s)
Chen, Po-Wen
Abstract
Striking a balance between authority and accountability has always been a contentious issue. This thesis starts from the business judgment rule﹐ and aims at the issues of fiduciary duties of corporate responsible persons, as well as the operation of the business judgment rule in the legal system of the U.S. and Taiwan. The thesis then further extends the research scope to the relationship between the business judgment rule and the allocation of decision-making power. The thesis attempts to construct the standard of judicial review from the point of the allocation of power between shareholders and directors.
The first chapter of this thesis is the preface. The second chapter focuses on fiduciary duties of corporate responsible persons, including the subject, object, and contents. With regard to corporate responsible persons, this thesis introduces the concepts of “the shadow director” and “the controlling shareholder”, and compares it to the idea of “de facto responsible persons” in Taiwan. With respect to whom the directors are responsible to, this thesis explores the stockholders and creditors, and goes further with the boundaries and limits on the exercise of majority shareholders'' power. Concerning the contents of fiduciary duties, it is recommended that the categories of fiduciary duties in Taiwan should be clearly defined by referring to the other countries’ legal systems. As to duty of good faith, this thesis suggests that there is no need to deem duty of good faith as an independent duty.
Chapter three introduces the judicial review of fiduciary duties in the Delaware Supreme Court, dividing the discussion into three aspects: duty of care, duty of loyalty, and duty of good faith. In light of duty of care, the business judgment rule has become the standard of judicial review in general cases in order to loosen higher standards of conduct, on the other hand, the judicial review diversifies in cases about hostile takeover. When discussing duty of loyalty, the directors will be scrutinized under entire fairness standard instead of the business judgment rule, because of the conflict of interest. Regarding duty of good faith, the uncertainty of its position in fiduciary duties results in the differences between the judicial review.
In Chapter four, the thesis goes on to approach the business judgment rule from different perspectives. First of all, this thesis introduces the reasons, constitutive elements, and legal effects of the business judgment rule. However, the development of the business judgment rule, the exemption clause in the charter, safe-harbor statutes, indemnification, and directors'' liability insurance have made fiduciary duties become a “no liability rule”. This thesis then makes a comparison between the applications of “business judgment rule” in different countries, and suggests that this judicial review shall be adjusted with the different corporate governance. Moreover, this thesis focuses on studying the business judgment rule from the point of the demarcation of power. The discrepancy of the agency theory and the nexus-of-contracts theory will result in different models of corporate governance—shareholder primacy and director primacy, and will further affect the the allocation of power between shareholders and directors.
Chapter five aims at empirical study of the business judgment rule applying in Taiwan Judiciary. This thesis not only criticizes the judgment referring to the business judgment rule, but also analyzes the feasible application of the business judgment rule in Taiwan’s Civil and Criminal Law. In addition, on the issue of the division of power between shareholders and directors, this thesis further discusses the issue that whether Taiwan’ Company Law has shown the inclination to director primacy and the existence of exclusive power. Moreover, this thesis attempts to draw a clear line between the power of shareholders and directors, and to connect the allocation of power with the standard of judicial review presented in chapter three. Last but not least, this thesis tries to construct the judicial review of fiduciary duties from the point of power division.
Chapter six serves as the conclusion. Aside from summarizing and summing up the prominent ideas addressed above, this thesis proposes the future directions of revising Company Law in Taiwan. Through the hardwork of the scholars and judges in Taiwan, it is expected that the standard of judicial review will be constituted in order to balance the authority and accountability of corporate governance, and Taiwan Judiciary will construct our own “business judgment rule” in the future.
Subjects
the business judgment rule
the allocation of power between shareholders and directors
the de facto responsible persons
fiduciary duties
entire fairness
the agency theory
the nexus-of-contracts theory
shareholder primacy
director primacy
exclusive power
the standard of judicial review.
SDGs
Type
thesis
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