ERISA regulates most benefit plans offered by private employers, both pension plans and welfare plans. Pension plans systematically defer compensation until termination of employment (or longer), and welfare plans provide other types of benefits designated by statute, of which health insurance is the most costly by far. Because of the importance of ensuring retirement income, health care, and other socially valuable welfare benefits (such as disability income and life insurance), the Code permits plans with certain features to “qualify” for favorable tax treatment, on the theory that such a subsidy encourages provision of benefits that would not otherwise be available. ERISA’s chief policy aims are to promote informed decision making by workers; to prevent mismanagement and abuse of plan assets by administrators; to protect worker reliance on the benefit promises made; and to preserve employer choice with regard to offering benefits and, provided that minimum standards are met, in tailoring benefit programs to serve the needs of the business.

ERISA strictly regulates fiduciaries. While ERISA’s fiduciary rules were abstracted from state trust law, several important departures exist. Congress adopted a broad functional definition of fiduciary so that all decision makers – not just asset managers (traditional trustees) – can be held accountable. Importantly, however, decisions by employers respecting the design, establishment, or modification of an employee benefit plan are not fiduciary acts for they do not implicate program management (the so-called settlor versus trustee distinction). ERISA specifies a stringent set of fiduciary duties, including four major obligations: loyalty; prudence; compliance with plan terms that do not violate ERISA; and (generally) investment diversification. Plan provisions that would excuse fiduciary breach (exculpatory clauses) are explicitly barred. In addition, certain transactions involving insider dealings with the plan are prohibited regardless of fairness or whether loss ensues. Fiduciary liability with regard to participant-directed investments has received careful attention from both courts and regulators and is specially examined in the chapter.

In preparation for Chapters 5–7 – which detail the three components of the proposed trust-based framework – this chapter addresses three issues. With reference to the social rights literature, it first substantiates the conclusion that social rights are justiciable, justifying the need for an enforcement framework to be used by the courts. Secondly, the chapter describes how the courts can use the concept of political trust as the basis for a social rights enforcement framework. It explains that under the trust-based framework, the courts promote the elected branches’ trustworthiness with respect to social rights. The courts specifically hold the elected branches to a ‘standard of trustworthiness’, effectively enforcing the three constituent expectations of trust in the citizen-government relationship – goodwill, competence and fiduciary responsibility. Lastly, the chapter outlines four justifications – theoretical, instrumental, practical and democratic – for why political trust should provide the basis for a social rights enforcement framework.

This chapter addresses, as a third component of the proposed framework, the third constituent expectation of trust in the citizen-government relationship: fiduciary responsibility. Employing scholarship on both private fiduciary law and fiduciary political theory, it defines the expectation as an expectation that the elected branches will fulfil their fiduciary duty of loyalty to citizens. This duty translates, the chapter argues, into an expectation of non-corruption from the elected branches’ staff. The chapter also details how the courts can enforce the expectation. It explains that for this component, the courts aim to curb corrupt practices from the elected branches’ staff, and it identifies steps the courts can take to do so: greater probing into the state’s financial resources; strictly enforcing public procurement law; holding non-state actors accountable to the public; involving specialised anti-corruption agencies; and imposing financial sanctions on government actors. The chapter illustrates these steps using cases from various jurisdictions, including South Africa, Uganda and the UK.

This chapter lays the necessary conceptual foundation for the book’s proposed trust-based framework. It draws on theoretical and empirical scholarship on trust to offer a conceptualisation of trust in the social rights context. It first envisages trust as relational, meaning that trust may only arise in a relationship that contains three elements: control, discretion/uncertainty and vulnerability (a ‘trust relationship’). Secondly, it defines trust in a trust relationship as a set of three expectations held by a truster about a trustee: an expectation that the trustee will exercise goodwill towards the truster (‘expectation of goodwill’); an expectation that the trustee will exercise competence towards the truster (‘expectation of competence’); and an expectation that the trustee will fulfil her fiduciary responsibility (if any) to the truster (‘expectation of fiduciary responsibility’). The chapter then applies this conceptualisation to the relationship between citizens and the elected branches of government with respect to social rights (the ‘citizen-government relationship’), characterising it as a trust relationship and defining trust in it.

Chapter 8 first provides an overview of the stipulations regarding how things held in tenancy in common (the most common co-ownership form of property around the world) should be administered and sold, as well as co-owner agreements not to partition. Then, Chapter 8 addresses whether the several types of rules lead to underuse or overuse — that is, whether tenancy in common may lead to tragedy of the commons or anticommons. The prevalent doctrine that provides one co-owner with a unilateral power to call for partition avoids a long-term tragedy but underinvestment and underuse of co-owned resources are still likely. This chapter ends with a proposed solution to ameliorate the underinvestment and underuse problems.

Courts, practitioners, and academics alike have long considered corporate officers and directors to be fiduciaries of the public corporation and its shareholders. As corporate law has evolved, however, with the business judgment rule strengthening, the duties of care and loyalty narrowing in scope, and executive compensation schemes further introducing self-interest into corporate decision making, the fiduciary paradigm is no longer an accurate description of the nature of the relationship between corporate managers and the corporation. Corporate officers and directors have significant latitude to make decisions that take into consideration their self-interest while still satisfying their duties to the corporation. Further, the “best interests” of the corporate entity and its multitude of stakeholders are highly variable and often ill-defined, such that it would be impractical to pursue those interests as a singular goal. This Article argues that corporate officers and directors are not governed by fiduciary duties in the truest sense of the term. This misconceptualization inhibits an accurate understanding of the dynamics underlying corporate decision

The mythology of the Market is strongly evident, indicated by the corporate camouflage of existential desire by the wide range of constructed desires. This mythology has materialised in the personalisation of the idea of the corporation. Its functioning is revealed by the commodification of individuals within models of regulatory capitalism and by the structural embedding of debt as credit. These trends have been promoted by the digitisation of corporate function, by algorithmic profiling of individuals as consumers and by the exploitation of Big Data. This has morphed into surveillance capitalism. The non-mythological way forward would start with focusing on all shareholders, including all citizens on whom the corporation impacts. This is the reimagining of corporations on purpose-based, fiduciary principles. This in turn would require the redrafting of competition and consumer protection law, as well as shifting the control of personal data to the individual. It would also require changes to employee relations strategies.

Law by its very nature tends towards the constraint of the decision-making of individuals, and so has an inherent – but not inevitable – mythological disposition, especially when in combination with both the sovereign and regulatory power of the State. Thereby it reflects shifting forms of – most recently neoliberal – power and truth. A non-mythological law will need to be framed constitutionally but will also require a rethinking of the rule of law, which is currently mostly comprised of anatomical lists of preferred characteristics. There are alternative approaches in the form of teleological accounts – preferred here – and prominent amongst which is that of Krygier. However, he does not go far enough, settling for a critical exploration of social traditions and seeing the arbitrary use of force as the dominant target. This tends to ignore the spread of sovereign power into regulatory forms, which are as intrusive as arbitrary power, albeit in a different manner. An existential rule of law would be founded on purpose-based, fiduciary principles which committed agencies to promote the non-mythological interests of self-responsible individuals. Trust would play a valuable but secondary role in such arrangements.

Directors’ duties can be classified into two themes: duties in relation to care and skill, and duties in relation to loyalty and good faith. Chapter 10 provided an overview of the duties as a whole, and Chapter 11 provided the history and current law in relation to the duties of care and skill. This chapter is the first of two chapters addressing the duties of loyalty and good faith. These duties fall into two categories: those concerned with the way in which directors exercise the powers and discretions vested in them, and those concerned with the standard of conduct expected from directors.

This chapter examines the nature of fiduciary duties. They are difficult to define but include loyalty, acting in good faith and ensuring that there is no conflict of interest. This relationship arises where one person has undertaken to act for another. E.g. trustee and beneficiary, solicitor and client, and company director and board. Such relationships also arise where it develops from the nature of the duties owed such as the employer and employee relationship. Not all duties owed by a fiduciary are fiduciary in nature such as the duty of care owed by a solicitor to his client. The emphasis in this area of law is on the fact that a fiduciary cannot make a profit from his position and any profit will be owed to his principal e.g. a trustee must disgorge any profits made through his position as a director if the directorship is attributable to his trusteeship. The law does not differentiate between profits made in good faith and those made in bad faith. Much of the chapter concentrates on the question of bribes and opportunities that arise through the position of a fiduciary. The law is now settled that the principal can claim a proprietary remedy rather than a personal remedy which is relevant where a fiduciary is bankrupt as the principal will have the first claim to any funds held by the fiduciary.

This chapter coins the term “stakeholder fiduciary” to describe fiduciaries who are formal beneficiaries of their own exercise of fiduciary power. The fiduciary duty of loyalty applies differently to stakeholder fiduciaries, requiring not complete self-abnegation, but rather solidarity with other beneficiaries. Accordingly, a stakeholder fiduciary may retain an equitable share of the profits she generates through her position—even when such profits are the product of conflicted transactions or misappropriated opportunities. More striking still, when a stakeholder fiduciary participates in collective governance, she is entitled to vote exclusively in her own interests as long as she does not abuse her voting power to dominate other beneficiaries or undermine the purposes of the fiduciary relationship.

The chapter argues further that American courts give extra deference to the decisions of stakeholder fiduciaries. As long as a stakeholder fiduciary’s interests are plausibly consistent with the interests of other beneficiaries, courts will allow her to decide for herself how much time and energy she should devote to a particular decision. The best explanation for this deferential standard is that courts trust stakeholder fiduciaries to exercise due care without intrusive judicial oversight precisely because these fiduciaries have a direct stake in their own successful performance.

This chapter examines the fiduciary duties of for-profit managers in modern liberal society. To arrive at the right “mix” of these duties, it compares the fiduciary duties implied by a standard descriptive model of our society with two competing normative models: Lockean libertarianism on the “right” and neo-classical republicanism on the “left.” This comparison shows that all three versions of liberalism, even the one with a Lockean night-watchman state, require far more extensive duties than we now expect, including a professionalization of management itself. And it shows that the version of liberalism with the most expansive state, neo-classical republicanism, requires the most appealing set of for-profit fiduciary duties. More basically, it concludes that what makes this latter set most appealing is that we ourselves are evaluating it from the perspective it recommends for for-profit managers: What is best, by our own best lights, for society as a whole.

Some interpersonal interactions involve substantial trust, while others do not. The interaction between an infirm, elderly parent who needs personal care or management of assets and an adult child who undertakes to provide it is an example of a relationship that typically involves substantial trust. Some other interactions, however, even long-term interactions or those between repeat players, can require much less trust because the terms of the arrangement are specific and entail strong verification protocols. This chapter focuses on the trust, in the precise legal sense of that term, and the relationship between the trustee of the trust and the trust’s beneficiaries and settlor. To what extent does trusteeship in the legal sense require trust in the general sense? The chapter examines the features of the express trust under modern U.S. law and practice that would seem to require there to be a significant degree of trust in the trustee by the trust’s beneficiaries and/or settlor. The paper also examines the features of modern U.S. trust law and practice that attempt to protect the trust’s settlor and/or beneficiaries so that they need not place worryingly high levels of trust in the trustee.

My chapter considers the operation of trust in contracts and fiduciary relationships. Much has been written about how trust might figure in each setting, but there is little academic literature comparing the profile and workings of trust against the backdrop of the two legal forms. The gist of my argument is that contracts tend to orient and channel trust in one set of ways, and fiduciary relationships in a different set of ways. Part 2 draws a distinction between interpersonal trust and what, informed by work in sociology, I call ‘confidence’ in the predictable functioning of social or technological systems. I then argue that confidence is likely to develop differently in contracts than in fiduciary relationships, and that this has implications for how trust is likely to develop in each legal setting. In Part 3 of the paper I argue that there are reasons to think that the content of trusting beliefs might be different in fiduciary settings than in contractual settings. These reasons look to key differences between the contract form and the form of fiduciary relationships. I then explore some types of case in which contract and fiduciary forms interact in ways that might affect the content of trusting beliefs.

Acting in good faith is an elemental requirement in fulfiling duties where the rightholder has reposed trust or faith in the dutyower. Sometimes, these dutyowers are fiduciaries. From an ethical perspective an essential feature of the trust and agency relationships is that a principal is entitled to repose ‘trust’ in a trustee or agent – by ‘trust’ I mean the commonsense notion of trust, not the technical legal relationship of trustee and beneficiary. Even so, the practical relevance of the duty is typically misunderstood, in part because of common misunderstandings about the good faith duty’s relationship with fiduciary powers, trustworthiness, and good will. Acting in bad faith is a breach of faith or trust that has relevance to isolated pockets of trust and agency law. At an abstract and general level, where a trustee or agent acts in bad faith this allows the principal or the court to remove the trustee or agent, extinguishing his right to that role. The duty of good faith has nothing in particular to do with the exercise of fiduciary powers.