A neophyte to corporate law might ask where is it written in the California General Corporation Law that directors and officers are fiduciaries. The answer is nowhere. In fact, the phrase "fiduciary duty" appears only once in the GCL - in Section 800(b)(1) relating to the standing of shareholders to bring a derivative action. In contrast, the California Revised Uniform Limited Liability Company Act expressly defines the fiduciary duties of members and managers. Cal. Corp. Code § 17704.09.
Why does the GCL fail to state forthrightly that directors and officers are fiduciaries? The answer according to one leading treatise is that it goes without saying:
The 1977 Law does not undertake to specify that the directors and officers are fiduciaries in their relationship to the shareholders, but this has been stated in innumerable decisions and its repetition in the statute was considered unnecessary.
Marsh, Finkle & Bishop, Marsh's California Corporation Law § 10.02. To paraphrase Cicero, haec lex est, sive est illa scripta uspiam sive nusquam (this is the law, whether it is written anywhere or nowhere). See M. Cicero, De Legibus 1:42.
Saying it is so, however, doesn't answer the question of why directors and officers are classified as fiduciaries. Judge Easterbrook and Professor Fischel offer the following explanation:
The corporate contract locates the uncertainties in the holders of the residual claims - conventionally the equity investors. They receive few explicit promises. Instead they get the right to vote and the protection of fiduciary principles: the duty of loyalty and the duty of care.
Easterbrook & Fischel, The Economic Structure of Corporate Law 91 (1991).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
