Corporate Governance: A Moving Target

Most state corporation statutes were designed for the quasi-publicly traded corporation, but these receive very little attention from the commentators. These are the corporations which have gone public, but the lack of active trading means there is no relation between sale price of shares and actual value. Four reforms are necessary, from which publicly traded corporations could be exempted: 1. shareholder voting control, 2. preemptive stock purchase rights, 3. rights of appraisal, and 4. requirement of disclosure of information to shareholders. Another major area of inquiry should be the fiduciary duties of the director. It is appropriate to view the director as a fiduciary, since this clarifies the director's duties of care and of loyalty. The degree of care expected from a director has dramatically increased and includes considerations of practical business decision-making as well as of liability. The duty of loyalty is designed to deal with the many potential conflicts of interest with which a director may be confronted. Clear explanations of the duty of loyalty need to be developed.