ABSTRACT
The relationship between fiduciary duty and contract has never been clear. The law of fiduciaries has long checked discretionary control of other people’s property, notably in corporate governance, where directors owe a corporation duties of care and loyalty. Yet, contract has also had the capacity to modify these duties to an important – but uncertain – extent because neither body of law contained a meta-rule specifying which would ‘trump’ in the event of conflict. Uncertainty was rarely problematic, however, because directors lacked the power to fully contract away their control of the corporation or their concomitant fiduciary duties.
This has changed in the past thirty years, as activist shareholders – in particular, private equity investors – increasingly use contract to control corporations while minimizing fiduciary risk, through the use of what we call ‘corporate control contracts’ (CCKs) – that is, to contractualize corporate governance. Contractual corporate governance is controversial because it can vest power in a single controller, which can impair basic procedural protections of corporate law, such as shareholder voting and directors’ fiduciary duties …
Lipson, Jonathan C and Evans, Eli Alexander, Corporate Due Process (July 10, 2025).
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