Document Type
Article
Publication Title
Washburn Law Journal
Publication Date
2006
Volume
45
First Page
367
Abstract
(Excerpt)
Smith v. Van Gorkom is the watershed case in which the board of a public company was held liable for breach of its fiduciary duty of care. The board of Trans Union Corporation (Trans Union) approved the company's sale to Jay Pritzker after a twenty-minute oral presentation by Chief Executive Officer Jerome Van Gorkom. The board spent only two hours considering Pritzker's offer before approving it. The directors received no notice or information before the meeting that its purpose was to approve the company's sale to Pritzker, nor did they receive anything in writing describing the proposed deal. No crisis or emergency warranted their hurried approval of the sale.
When I traveled by plane from New York to Washburn University School of Law to participate in a symposium commemorating the twentieth anniversary of Smith v. Van Gorkom, I spent the entire time chatting with the passenger seated next to me. During our conversation, he confided that he had served for years as a senior officer of a public company and that he now sat on the board of a closely held corporation. Eventually he asked me about the purpose of my trip. "I'm presenting a paper at a symposium about the fiduciary duty of care," I told him. At this point, I decided to ask him about any experience he may have had with this topic. "What kinds of discussions have you had with your attorneys about the duty of care?" I asked. He stared blankly for a few moments, so I asked, "Have you ever had a discussion about the duty of care with your attorneys, fellow board members, or officers?" Finally he answered, sharing his experience as director of a small company. "We've made several loans to employees when they were in need. We care about our employees. Yes, the duty of care is important for us."
Fiduciary duty does not seem to be part of the discourse that takes place among corporate directors, executives, officers, managers, and the lawyers who advise them. It may be that only law professors talk about fiduciary duty, and this may be especially true as far as the duty of care is concerned. Not all law professors, however, talk about the duty of care. At least one does not teach Van Gorkom.
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Available at: https://contentdm.washburnlaw.edu/digital/collection/wlj/id/5525/rec/20