Corporate Bodies: Who performs Management Function?
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Abstract
This article approaches an issue of corporate governance from the narrow perspective of legal significance of governing function. The discussion was initiated by the inconsistency in regulations of former Lithuanian Law on Corporations and Lithuanian Civil Code concerning the governing bodies of legal entities. The subject – matter of this article is structural analysis of governing function. The objectives of this article were to reveal the main inconsistencies of Lithuanian legal approach towards governing function of legal entities and propose the criteria to analyze them.
Whereas this is an interdisciplinary topic, a comparative view of governing function is taken from economic and legal perspectives. From economical analysis of the notion the inference is drawn, that this would be substantially precarious to reduce governing function to the managing body of the legal entity. Contrarily, legal analysis infers, that governing function has to be interpreted narrowly.
This article shows that governing function is properly characterized as applying in narrower circumstances than the language of statutory regulations suggests. Specifically, governing function is performed and fiduciary duties arise only when one party delegates open–ended control over her property to another party. Extending governing function beyond this specific situation decreases the effectiveness of owners’ governance rights and dilutes true governing bodies’ legal and extralegal incentives. The article analyzes how this view operates in a legal form of corporation. Those whom the law classifies as governing bodies must carry on their dealings with beneficiaries at a level high above ordinary commercial standards.
Whereas this is an interdisciplinary topic, a comparative view of governing function is taken from economic and legal perspectives. From economical analysis of the notion the inference is drawn, that this would be substantially precarious to reduce governing function to the managing body of the legal entity. Contrarily, legal analysis infers, that governing function has to be interpreted narrowly.
This article shows that governing function is properly characterized as applying in narrower circumstances than the language of statutory regulations suggests. Specifically, governing function is performed and fiduciary duties arise only when one party delegates open–ended control over her property to another party. Extending governing function beyond this specific situation decreases the effectiveness of owners’ governance rights and dilutes true governing bodies’ legal and extralegal incentives. The article analyzes how this view operates in a legal form of corporation. Those whom the law classifies as governing bodies must carry on their dealings with beneficiaries at a level high above ordinary commercial standards.
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Authors retain copyright of their work, with first publication rights granted to the Association for Learning Technology.
Please see Copyright and Licence Agreement for further details.
