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Paz-Ares, Cándido --- "The Fiduciary Duties of Directors: A Proposal for Improving Corporate Governance in Latin America" [2005] ELECD 197; in Tully, Stephen (ed), "Research Handbook on Corporate Legal Responsibility" (Edward Elgar Publishing, 2005)

Book Title: Research Handbook on Corporate Legal Responsibility

Editor(s): Tully, Stephen

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843768203

Section: Chapter 3

Section Title: The Fiduciary Duties of Directors: A Proposal for Improving Corporate Governance in Latin America

Author(s): Paz-Ares, Cándido

Number of pages: 19

Extract:

3 The fiduciary duties of directors:
a proposal for improving corporate
governance in Latin America1
Cándido Paz-Ares



Corporate governance, fraud and negligence: a working hypothesis
The objective of this chapter is to understand the relationship between rules of
law and market forces and, from there, to establish the bases of a legal policy
concerning director liability capable of providing operators with guidelines for
designing their governance structures, lawyers with criteria for interpreting the
legislation in force and legislators with elements of reflection for a legislative
reform which, ceteris paribus, will tend to maximize the value of business
enterprises and, consequently, facilitate the development of capital markets.
Critical to such an endeavour is pinpointing the fulcrum of equilibrium in the
director liability system that will allow this efficiency objective to be
achieved. This point of equilibrium is not a universal one since it depends on
the conditions of individual markets, the institutions operating in individual
environments, the circumstances involved in individual companies and even
the preferences of the parties thereto.
The fundamental bases for the qualitative estimation of the phenomena
concerned lie in an analytical separation of the technological aspect (manager-
ial capacity to generate the highest returns) from the deontological aspect
(management's willingness to distribute gains in the most equitable manner)
and in the corresponding distinction between the duties of care and loyalty. The
duty of care ­ the duty of diligence of the `orderly businessman' ­ requires
directors to invest a specific amount of time and effort and ...