Obedience as the Foundation of Fiduciary Duty
Atkinson, Rob, Journal of Corporation Law
I. INTRODUCTION II. IDENTIFYING THE DUTY OF OBEDIENCE A. Locating the Duty of Obedience in the Tripartite Scheme of Fiduciary Duties 1. Depth 2. Breadth 3. Length 4. Summary B. Locating the Duty of Obedience in Four Fiduciary Contexts 1. For-Profit Corporate Law a. The Trilogy of Bilateral Corporate Relationships i. Relationship of the State as Principal to the Corporation's Equity Investors as Agents ii. Relationship of Owners as Principals to Managers as Agents iii. Relations Among Owners: Minority Shareholders Constraining the Majority b. Why Corporate Law Theorists Overlook the Duty of Obedience 2. Private Trust Law a. The Trilateral Structure of Trusts b. The Dual Function of Trusts i. The Earning Function ii. The Spending Function c. The Strong Form of the Duty of Obedience d. Enforcement 3. Charitable Trust Law a. Purpose b. Duration c. Enforcement-The Weakness of the Strong Form 4. Charitable Corporation Law a. The Corporate Model b. The Trust Model c. The Common Flaw of Both Models III. NORMATIVE ANALYSIS: EVALUATING THE DUTY OF OBEDIENCE A. Narrowing the Scope of the Inquiry 1. Normative Analysis of the Weak Form of the Duty of Obedience a. The Absence of Any Strong Duty of Obedience in the Business Corporation b. The Strong Duty of Obedience in the Law of Private Trusts B. Dead Hand Control in the Law of Charity 1. The Traditional Case for Dead Hand Control a. Deontological Arguments b. Consequentialist Arguments 2. The Positive Alternative to Dead Hand Control: Charitable Independence 3. The Wrong Solution to a Real Problem: Dead Hand Control Against Fiduciary Bias Toward Current Expenditure IV. RECOMMENDATIONS FOR REPLACING DEAD HAND CONTROL OF CHARITABLE ASSETS A. Individual Monitors 1. Default Takers Policing Restricted Gifts 2. The Traditional Charitable Visitor B. Institutional Monitors 1. Creating For-Profit Firms 2. Expanding Governmental Supervision 3. Monitoring Charity with Charity V. CONCLUSION
Commentators, both doctrinal and theoretical, (1) have come to agree that the fiduciary relationship rests on twin pillars, the duty of care and the duty of loyalty. This paper argues that a third duty, obedience, is more basic, the foundation on which the duties of care and loyalty ultimately rest. In place of the prevailing dualistic theory of fiduciary duty, it offers a trinitarian alternative. As in traditional trinitarianism, the claim here is that, properly understood, three identifiably different elements are, essentially, one.
In that sense, fiduciary trinitarianism is, to shift metaphors from theology to physics, a unified field theorem of fiduciary duty. As in physics, the theory offered here takes up a double challenge: to explain more data--in this case, more legal doctrine and social policy--more simply. The ideal, here as there, will be to reduce all the relevant phenomena to a single, unifying principle. Physicists have yet to name their fundamental force; in the fiduciary relationship, it is the agent's duty to obey the will of the principal. (2)
Obedience to that will is the source not only of the duties of care and loyalty, but also of a peculiar but widely ignored obligation. This is the duty of private and charitable trustees to follow the directions of principals who are dead, a duty that gives principals what is known in Anglo-American law as dead hand control. As we shall see, this peculiar obligation occurs outside the principal scope of the prevailing dualist theory. That theory, largely economic in its method, has tended to focus on for-profit organizations, particularly business corporations, and to assimilate other fiduciary relationships, especially private trusts and charitable organizations, to the corporate model. …