The Duty of Fair Dealing: Board Judgment in Management Led Buyouts

This paper investigates board judgment in response to management led buyouts (MLBs). Board response is suggested to be guided by the business judgment rule and its dual duties of care and loyalty. The duty of loyalty is seen to be evolving into a specification of fair dealing. With this trend, the c...

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Bibliographic Details
Published in:Journal of business ethics 1998-01, Vol.17 (1), p.7-13
Main Authors: Sebora, Terrence C., Rubach, Michael J.
Format: Article
Language:English
Subjects:
Boards of directors
Business
Business enterprises
Business ethics
Business management
Business strategies
Business structures
Buyouts
Conflicts of interest
Corporate acquisitions
Corporate governance
Corporations
Directors, Boards of
Ethics
Fairness
Fiduciary management
Leveraged buyouts
Livestock auctions
Loyalty
Management buyout
Management buyouts
Market economy
Purchasing
Responsibilities
Shareholders
Stock control
Stockholders
Studies
United States
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Summary:This paper investigates board judgment in response to management led buyouts (MLBs). Board response is suggested to be guided by the business judgment rule and its dual duties of care and loyalty. The duty of loyalty is seen to be evolving into a specification of fair dealing. With this trend, the current interpretation of the business judgment rule emphasizes the role of care and relies on the market to insure fairness. Possible failures in the MLB market which limit its effectiveness in assuring fairness are discussed. Recommendations to counteract these failures are suggested.
ISSN:0167-4544
1573-0697
DOI:10.1023/A:1005705626695