Understanding Conflicts of Interests

OK! So I am about to re-write my chapter on a director's duty of loyalty and his duty to avoid a conflict.

The main point of the work is to get across how we understand the duty of loyalty in a fiduciary relationship between director and shareholder. A lot of work seems to focus either on fiduciary duties generally or attempts to categorise them.

This chapter will look specifically at the director's duty. The main focus is pointing out the law relating to a director's fiduciary duties developed not out of company law but out of notably trusts and partnership law. Where both fiduciaries in those relationships are distinct from that of shareholder/director. It may be seen as a little naive by some judges and academics to just assume the duty applies the same to this fiduciary relationship as it does to the others.

Developing the law based on principles from other doctrines such as trusts leads to unnecessary and restrictive rules on the director who is fundamentally a different character from a trustee.

Trusts law relating to the relationships of the parties developed not on principles of economics but more on those of religion, morality and social.

The confusion of the exact nature of a fiduciary's duty of loyalty has lead people to believe there are two distinct rules inherent in this duty. That of no-conflict and no-profit. This chapter aims to show that two distinct rules in a director/shareholder relationship are restrictive and unnecessary let alone doctrinally flawed.

Many reasons for this approach have been unearthed including those of shareholder protection, disclosure, requirements, multiple directorships and so on.

I also plan to do some empirical work in relation to this chapter to gather evidence of directors (exec and non-exec) serving on more than one board, either concurrently or consecutively and look for correlations in market value of those firms.

I am presenting this work internally at UEA tomorrow in our research seminar group.