Opting Out of the Fiduciary Duty of Loyalty: Corporate Opportunity Waivers within Public Companies

For nearly two centuries, a cornerstone of Anglo-American corporate law has been the fiduciary duty of loyalty, the most demanding and litigated fiduciary obligation imposed on corporate managers. The duty—which regulates financial conflicts of interest and requires managers to subordinate their own interests to the corporation’s—represents a key policy lever to address the most pernicious of intra-firm agency costs. Practitioners, academics, and jurists alike have characterized loyalty as the most important fiduciary obligation, crediting it with facilitating efficient corporate stewardship and catalyzing investment and entrepreneurship. Indeed, a well-known literature in law and finance has documented the beneficial role that credible conflict-of-interest management plays in promoting company value, vibrant capital markets, and firm longevity. The duty of loyalty has long been characterized as inveterate and unyielding: While much of corporate law consists of “default rules” that parties may freely alter, loyalty is widely perceived as “immutable”—impervious to private efforts to dilute, tailor, or eliminate it.