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Hill, Claire A.; McDonnell, Brett H. --- "Structural bias, R.I.P.?" [2018] ELECD 298; in Smith, G. D.; Gold, S. Andrew (eds), "Research Handbook on Fiduciary Law" (Edward Elgar Publishing, 2018) 241

Book Title: Research Handbook on Fiduciary Law

Editor(s): Smith, G. D.; Gold, S. Andrew

Publisher: Edward Elgar Publishing

ISBN: 9781784714826

Section: Chapter 12

Section Title: Structural bias, R.I.P.?

Author(s): Hill, Claire A.; McDonnell, Brett H.

Number of pages: 19

Abstract/Description:

Structural bias has traditionally been a significant obstacle to adequate director monitoring. For a period of time early this century, the development of a fiduciary duty of good faith suggested that the Delaware courts were becoming serious about addressing structural bias, something we celebrated in previous work. In this chapter, after reviewing the concept of structural bias, we consider how Delaware’s corporate fiduciary duty law has evolved relevant to the concept. We find that recent case law calls into question how much force the duty of good faith has to address structural bias. That may be a serious problem, or it may not. Fiduciary duty law is not the only way to address structural bias. Other legal and non-legal mechanisms may address the problems that structural bias creates, and those mechanisms have evolved significantly. We ask whether other developments in this century have affected whether directors will be subject to structural bias, and whether, if they are so subject, they will be able to act on it. These developments include: the well-known monitoring failures at Enron, WorldCom, and Adelphia, proxy access, say on pay, independent director requirements, increasing diversity on boards, the increasing role of government in monitoring companies when Deferred and Non-Prosecution Agreements are entered into, and the rise of economic activism by hedge funds and corporate social responsibility. We conclude by pondering (inconclusively) what all of this may entail for future development of corporate fiduciary duties.