Monday, June 3, 2019
At the 2019 Law and Society Association Annual Meeting last week, Geeyoung Min presented her paper Governance by Dividends. In the paper, she focuses attention on stock dividends. Near the end of her presentation, Geeyoung trod over ground on which so many of us also have trod--relating to judicial standards of review in fiduciary duty actions. As familiar as the story was, she helped me to see something I had not seen before. Perhaps many of you already have identified this. If so, I am sorry to bore you with my new insight.
Essentially, what I came to realize during her talk--and develop with her and members of the audience in the ensuing discussion--was that Delaware's judiciary may have (and I may be quoting Geeyoung or someone else who was there, since I wrote this down long-form in my contemporaneous notes) muddied the waters by seeking clarity. What do I mean by that? Well, by addressing relatively clearly the circumstances in which the business judgment rule, on the one hand, or entire fairness, on the other, govern the judicial review of corporate fiduciary duty allegations, the Delaware judiciary has effectively made the interstitial space between the two--intermediate tier scrutiny--less clear.
As I reflected a bit more, I realized that an analogy could be made to the development of the substantive law of corporate fiduciary duties in Delaware. The overall story? Judicial refinement of the fiduciary duties of care and loyalty has left the duty of good faith somewhat more indeterminate.
I am not sure where all this goes from here, but there may be lessons in these musings for both judicial and legislative rule-makers, among others. As always, your thoughts are welcomed.