Corporate Director and Officer Liability: "Discretionaries" Not Fiduciaries

by Marc I. Steinberg

Overview

For centuries, directors and officers have been identified as fiduciaries, bearing a legal and ethical duty to act in the best interests of those they represent. However, the liability standards that ordinarily exist are too lenient to be characterized as fiduciary. This misrepresentation is detrimental to the rule of law, contravenes reasonable investor expectations, and impairs the integrity of the financial markets.

Corporate Director and Officer Liability: "Discretionaries" Not Fiduciaries calls for the removal of fiduciary status for corporate directors and officers in favor of the adoption of a new term that provides an accurate description; corporate directors and officers are, instead, 'discretionaries.' This term accurately portrays the status of corporate directors and officers who are held to varying standards of liability depending on the applicable facts and circumstances.

Against this new model, the book addresses a wide range of key issues, including the duty of care, the business judgment rule, exculpation statutes, the duty of good faith, interested director transactions, derivative litigation, mergers and acquisitions, and closely held corporations.

Original and thought-provoking, Corporate Director and Officer Liability offers an alternative framework that enhances corporate governance standards while protecting corporate fiduciaries from undue liability exposure.

Product Details

ISBN-13:	9780197751503
Publisher:	Oxford University Press
Publication date:	06/27/2025
Pages:	240
Product dimensions:	6.10(w) x 8.90(h) x 0.90(d)

About the Author

Marc I. Steinberg is the Radford Chair in Law and Professor of Law at the Southern Methodist University (SMU) Dedman School of Law. He has lectured or received appointments at several other premier universities, including the University of Cambridge, University of Oxford, UCLA, and the University of Pennsylvania. Professor Steinberg was an attorney at the U.S. SEC, serving in its Division of Enforcement and Office of General Counsel. He has been retained as an expert witness in several high-profile cases. Professor Steinberg is one of America's most prolific authors of company law scholarship, having authored approximately 50 books and 150 law journal articles. He serves as editor-in-chief of The International Lawyer and The Securities Regulation Law Journal and is a life member of The American Law Institute.

Table of Contents

1. Corporate Directors and Officers Are "Discretionaries"-Not Fiduciaries2. Fiduciary Duties in Business Enterprises: A Historical and Contemporary Perspective3. The Illusion of Corporate Director and Officer Fiduciary Duty: The Duty of Care, the Business Judgment Rule, and Exculpation Statutes4. The Duty of Loyalty: Far More Bark than Bite5. Derivative Litigation: Corporate Directors Are "Discretionaries"6. Mergers, Acquisitions, and Dispositions: A Semblance of Fiduciary Duty7. Close Corporations: The Presence (or Waiver) of Fiduciary Duties8. Rhetoric versus Reality: The Federal Securities Laws9. Corporate Directors and Officers Are "Discretionaries": Proposed Standards of Liability10. The Clear Reality: "Discretionaries" Not Fiduciaries

Editorial Reviews

"Once again confirming his stature as a preeminent company law authority, Professor Marc Steinberg's most recent book superbly analyzing that directors and officers in fact are "discretionaries" is one of the most important works that has ever been written in the corporate and securities law fields." — Edward D. Herlihy, Partner, Wachtell, Lipton, Rosen & Katz

"At a time when Orwellian obscurantism is ascendant, Marc Steinberg's gimlet-eyed look at what accountability the law actually expects of those who are said to owe fiduciary duties to corporations is a refreshing example of how rigorous thinking can aid the difficult job of policymaking. Regardless whether you agree with his prescriptions, anyone concerned about striking the right balance between risk-taking and responsibility in corporate law will benefit from his thought-provoking analysis of the extent to which corporate leaders are legally accountable for the considerable discretion they exercise. Reality, not high-falutin rhetoric, must be the basis for sound corporate and securities law." — Leo E. Strine, Former Chief Justice, Delaware Supreme Court, former Chancellor,Delaware Court of Chancery

"Professor Steinberg's new book on director and officer liability is richly-researched, well-written, well-organized, and provocative." — E. Norman Veasey, Former Chief Justice, Delaware Supreme Court

"Professor Steinberg goes beneath the surface to look unflinchingly at how the law operates and makes a powerful case that the fiduciary headline doesn't match the story." — J. Travis Laster, Vice Chancellor, Delaware Court of Chancery

"Words matter. Marc Steinberg, one of the most informed and original voices in business law, demonstrates this in his highly readable and provocative new book. His target? Just the most sacred and fundamental principle of corporate law-fiduciary duties. If there is one thing executives, judges, and lawyers know about corporate law is that directors owe fiduciary duties to shareholders. Wrong says Professor Steinberg. The duties they owe are not "fiduciary" duties but rather a code of conduct that bears little relation to this common-law concept. Not only will readers learn a great deal about the substance of these duties, which is reason enough to read it, they may also come away convinced, as I was, that we should stop calling them by the wrong name. Even if they don't, it will be time well spent." — M. Todd Henderson, Michael J. Marks Professor of Law, University of ChicagoLaw School

"This important contribution to the literature on corporate governance explains how corporate directors and officers are held to widely varying standards of liability depending on relevant facts and circumstances and elucidates the wide variety of approaches to liability. The main argument, that describing officers and directors as fiduciaries is unacceptable because it mischaracterizes the legal landscape, is provocative and highly relevant to modern corporate lawyering. Anyone interested in understanding the legal risks facing corporate officers and directors would be wise to consider carefully the insights contained here." — Jonathan R. Macey, Sam Harris Professor of Corporate Law, Corporate Finance, and Securities Law, Yale Law School

"Once again, Professor Steinberg demonstrates his brilliance and gumption in critically evaluating and challenging concepts that have been too long ingrained in corporate lexicon. This is a must read from the law and business school classroom to the corporate boardroom." — Paul J. Geller, Partner, Robbins Geller Rudman & Dowd, LLP

"Marc I. Steinberg offers a thought-provoking challenge to the traditional understanding of corporate directors as fiduciaries and proposes a new concept based on the discretion that they exercise. This challenge is a must-read for everyone engaging with the law and practice of corporate governance." — Felix Steffek, Professor of Law, University of Cambridge, Faculty of Law

"Professor Steinberg has done an invaluable service to academia and the profession by forcing us to rethink the meaning of fiduciaries and their duties. For those of us in the Commonwealth, fiduciary duties do not include care and skill, which is tortious in nature, and reflects why US courts require gross negligence. But Professor Steinberg challenges even the duty of loyalty, which has taken on metaphysical cure-all properties, in the corporate and securities law world. It has been so diluted today that it is often better understood as a specific restraint on the exercise of discretionary power by directors, officers and controlling power-holders rather than an actuating duty." — Hans Tijo, CJ Koh Professor, The Faculty of Law, National University of Singapore

"This groundbreaking book is a masterful examination of the evolving landscape of corporate governance and liability. It challenges conventional notions of fiduciary duties, presenting an incisive argument for reclassifying directors and officers as 'discretionaries.' Professor Steinberg's unparalleled expertise, drawn from decades of legal scholarship and real world experience, shines through as he deconstructs the myths and realities of corporate accountability. With meticulously researched historical perspectives, robust legal analysis, and forward-thinking recommendations, this work is an indispensable resource. A thought-provoking contribution to the field, this book is as provocative as it is authoritative." — Stephen M. Bainbridge, William D. Warren Distinguished Professor of Law,UCLA School of Law

From the Publisher