Author
Prof Robert Rhee
Organisation/Institution
University of Florida Levin College of Law
Country
UNITED STATES
Panel
Corporate Law and Governance
Title
A Theory of Calibrated Fiduciary Duties in Firms
Abstract
Different forms of firms (e.g., partnerships, limited liability companies, and corporations) have and should have different standards of conduct for fiduciaries therein. Why? Despite apparent legal divergence, a single fiduciary rule governs all forms of firms. This Article presents a theory of calibrated fiduciary duties that explains important variations in the formulation of fiduciary duty and standard of conduct in all forms of firms. This idea has general applicability to the laws of business firms, irrespective of specific jurisdiction. The law cannot state fiduciary duty in a uniform standard because a single optimal welfare state for all forms of firms does not exist. To induce varying optimal ends, the law must uniquely calibrate the duty of care and the concept of good faith. This Article advances two important insights: (1) managers and owners are exposed to bilateral relational risk defined here as the intrinsic risk arising from their relationship, comprising of the risk of agency cost for owners and the risk of liability for managers, and (2) fiduciary law achieves unique optimal welfare states by intermediating personal risk preferences of owners and managers such that managerial actions, incentivized as such, actuate an intermediated risk preference that is optimal for each form of firm. Based on this calculus of bilateral relational risk and intermediated risk preference, this Article derives four factors of calibration, each uniquely affecting the standard of conduct to achieve a unique optimal welfare state for each form of firm. The theory of calibrated fiduciary duties explains why the law uniquely varies fiduciary standards in forms of firms and why this variance is right.
Biography
I am the John H. and Mary Lou Dasburg Professor of Law at the University of Florida Levin College of Law. My law school is a top ranked law school in the United States. I am a leading scholar in the field of corporate law and governance, and I have consistently published high level works at top law journals. I have a particular interest in the theory of the firm from a legal and economic perspective. I have published 47 law review articles and book chapters, and am one of the most cited professors on my faculty. I want to emphasize that much work, including the current submission to ASLI, is generally theoretical and produces ideas that have general applicability. I have a keen interest in Asia and ASLI. I am Korean-American. In 2017-2018, I served as a Distinguished Lecturer and Fulbright U.S. Scholar at Yonsei University Law School in Seoul, Korea. I am a relative newcomer to ASLI. I have participated and ASLI has accepted my works for presentation four times in the past several years: Seoul National University (2018), National University of Singapore (2019 & 2023), and Chulalongkorn University (2024). In each presentation, I contributed to the scholarly exchange in positive ways, and in turn I learned a tremendous amount about the laws of the Asian countries and Asia more generally. I wish to continue my participation in ASLI. I believe that I have important ideas to share with the community of Asian law scholars.
