Professors as Corporate Fiduciaries: Implications for Law, Organizational Ethics, and Public Policy

34 Pages Posted: 2 Apr 2015 Last revised: 29 Jul 2015

Date Written: March 31, 2015

Abstract

The Article envisions the possibility of a nonprofit university utilizing corporate and agency law principles in order to invoke a breach of fiduciary duty claim (or counterclaim) against a professor who engages in activities that the university deems disloyal — hence seeking termination and/or equitable relief consisting of compensation forfeiture and the revenue lost by the alleged fiduciary malfeasance — particularly activities that the professor believes would benefit her students but could be construed as detrimental to the university’s financial interests. Such potential allegations of disloyalty could arise out of advising students to take certain courses elsewhere due to cost considerations, encouraging transfer to another university altogether, or facilitating such transfer by serving as reference or through the utilization of the professor’s contacts at other institutions.

While this type of guidance may be considered protected speech under the First Amendment for faculty that teach at public universities, the present Article proposes that there are competing extraconstitutional factors and extralegal concepts that are also triggered by the aforementioned hypothetical. Thus, the Article proceeds by dissecting the doctrinal and theoretical schisms that render the fiduciary responsibilities of the university professor nuanced in both public and private institutions, generating vertical tensions between public and private law, horizontal frictions within private law itself, and also raising the question as to whether the corporate university is ultimately a nexus of contracts or something more: a creature of state law that encompasses a complex web of contending fiduciary relations and challenges corporate wealth maximization norms in favor of the stakeholder theory of the firm. After analyzing the legal, ethical, and public policy tensions that arise out of the above-noted scenario, the Article concludes by proposing a two-pronged judicial test that courts may employ in order to shield the professor who acts in good faith.

Keywords: fiduciary duty, fiduciary law, agency, agency law, corporate law, employment law, duty of loyalty, academic freedom, stakeholder theory, public policy

JEL Classification: K00, K10, K12, K19, K2, K22, K31

Suggested Citation

Ghahramani, Salar, Professors as Corporate Fiduciaries: Implications for Law, Organizational Ethics, and Public Policy (March 31, 2015). University of Virginia Law & Business Review (Vol 10; Forthcoming)., Available at SSRN: https://ssrn.com/abstract=2588199 or http://dx.doi.org/10.2139/ssrn.2588199

Salar Ghahramani (Contact Author)

Penn State University ( email )

Minderbroedersberg 4
Maastricht
Netherlands

HOME PAGE: http://sites.psu.edu/salar

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