Julian Velasco


Corporate law is characterized by a pervasive divergence between standards of conduct and standards of review. Courts often opine on the relatively demanding standard of conduct, but their judgments must be based on the more forgiving standard of review. Commentators defend this state of affairs by insisting that it provides guidance to directors without imposing ruinous liability. However, the dichotomy can lead many, especially those who focus on the bottom line, to call into question the meaningfulness of standards of conduct. Of particular concern is the increasing popularity, in legal and scholarly circles, of the notion that fiduciary duty standards of conduct are aspirational and unenforceable. This theory, which I will call the “aspirational view,” is misguided. The use of the term “aspirational” is especially problematic. Whatever else “aspirational” may mean, it does not mean obligatory or mandatory. Whether by design or only by effect, the aspirational view has the potential to undermine fiduciary duties significantly. In this Article, I will argue that fiduciary duty standards of conduct are in fact duties—fully binding on actors even when they are not enforced. I will also argue that the unenforced duty is a meaningful concept because people obey the law for many different reasons, and not simply out of fear of punishment.