Vanderbilt Law Review

First Page



One of U.S. corporate law's most salient features is its flexibility. Those who control and manage the corporation are given a long leash. This is particularly evident when the United States is compared with other countries in studies like the World Bank's annual Doing Business project. According to the detailed study that developed the World Bank methodology for measuring investor protection,1 the United States scored a 0.33 for "ex ante private control of self-dealing." This was not only below the world average of 0.36, but also well below the 0.58 average for common law countries. The United Kingdom, in contrast, received a perfect score of 1.0.2 That the country with the world's largest and deepest capital markets has, in some respects, among the world's looser corporate laws may seem counterintuitive. It works because of the strength of two underlying institutions. One is our disclosure system, which assures investors that they see the full picture. The other is the fiduciary concept, which replaces standardized prohibitions with the opportunity to evaluate managerial conduct on a more holistic basis. Applied soundly, the fiduciary concept filters opportunistic behavior by those in control of a corporation without deterring good faith efforts to further shareholder welfare in ways that might run afoul of a more technical set of restrictions.