Conflicts of interest United States corporate law

since earliest corporations formed, courts have imposed minimum standards prevent directors using office pursue own interests on interests of corporation. directors can have no conflict of interest. in trusts law, core fiduciary duty formulated after collapse of south sea company in 1719 in united kingdom. keech v sandford held people in fiduciary positions had avoid possibility of conflict of interest, , rule should strictly pursued . later held no inquiry should made transactions fiduciary interested in both sides of deal. these principles of equity received law of united states, , in modern formulation cardozo j said in meinhard v salmon law required punctilio of honor sensitive... @ level higher trodden crowd.

the standards applicable directors, however, began depart traditional principles of equity required no possibility of conflict regarding corporate opportunities, , no inquiry actual terms of transactions if tainted self-dealing. in delaware decision 1939, guth v loft inc, held charles guth, president of drink manufacturer named loft inc., had breached duty avoid conflicts of interest purchasing pepsi company , syrup recipe in own name, rather offering loft inc. however, although duty breached, delaware supreme court held court @ particular circumstances, , not regard conflict existing if company lacked finances take opportunity, if not in same line of business, or did not have interest or reasonable expectancy . more recently, in broz v cellular information systems inc, held non-executive director of cis inc, man named mr broz, had not breached duty when bought telecommunications licenses michigan area own company, rfb cellular inc.. cis inc had been shedding licenses @ time, , broz alleged thought there no need inquire whether cis inc interested. cis inc taken over, , new owners pushed claim brought. delaware supreme court held because cis inc had not been financially capable @ time buy licenses, , there no actual conflict of interest. in order sure, or @ least avoid litigation, delaware general corporation law §144 provides directors cannot liable, , transaction cannot voidable if (1) approved disinterested directors after full disclosure (2) approved shareholders after disclosure, or (3) approved court fair.

miller v miller, 222 nw.2d 71 (1974)

corporate officers , directors may pursue business transactions benefit long can prove transaction, although self-interested, nevertheless intrinsically fair corporation.

lieberman v becker, 38 del ch 540, 155 2d 596 (super ct 1959)
dgcl §144 contains rule burden proving unfairness remains on plaintiff after disclosure
flieger v lawrence, 361 a2d 218 (del 1976) burden of proof shifts onto plaintiff show transaction conflicted if approval disinterested stockholders or directors has been given transaction. remillard brick co v remillard-dandini co, 109 cal app2d 405 (1952)
oberly v kirby, 592 a2d 445, 467 (del 1991)
cinerama inc v technicolor inc, 663 a2d 1156, 1170 (del. 1995)
benihana of tokyo inc v benihana inc., 906 a2d 114 (del. 2006)




^ [1726] ewhc ch j76
^ see whelpdale v cookson (1747) 27 er 856
^ 164 n.e. 545 (n.y. 1928)
^ 5 a2d 503 (del 1939)
^ 637 a2d 148 (del supr 1996)
^ see revised model business corporation act §8.61 , california corporation code §310