Lord Eldon Redux: Information Asymmetry, Accountability and Fiduciary Loyalty

48 Pages Posted: 28 Nov 2016 Last revised: 3 Mar 2017

See all articles by Amir N. Licht

Amir N. Licht

Interdisciplinary Center (IDC) Herzliyah - Radzyner School of Law; European Corporate Governance Institute (ECGI)

Date Written: December 26, 2016


This article investigates the development of accountability and fiduciary loyalty as an institutional response to information asymmetries in agency relations, especially in firm-like settings. Lord Eldon articulated the crucial role of information asymmetries in opportunistic behaviour in early nineteenth century, but its roots are much older. A thirteenth century trend toward direct farming of English manors and the transformation of feudal accounting after the Domesday Book and early Exchequer period engendered profound developments. The manor emerged as (possibly the first) profit-maximizing firm, complete with separation of ownership and control and a hierarchy of professional managers. This primordial firm relied on primordial fiduciary loyalty - an accountability regime backed by social norms that was tailored for addressing the acute information asymmetries in agency relations. Courts have gradually expanded this regime, which in due course enabled Equity to develop the modern duty of loyalty. These insights suggest implications for contemporary fiduciary loyalty.

Keywords: fiduciary, loyalty, accountability, accounting, corporate governance, firm, agency

JEL Classification: D82, G30, G38, K10, K22, M41, M42, N23, N83

Suggested Citation

Licht, Amir N., Lord Eldon Redux: Information Asymmetry, Accountability and Fiduciary Loyalty (December 26, 2016). Oxford Journal of Legal Studies (Forthcoming), European Corporate Governance Institute (ECGI) - Law Working Paper No. 348/2017, Available at SSRN: https://ssrn.com/abstract=2875680

Amir N. Licht (Contact Author)

Interdisciplinary Center (IDC) Herzliyah - Radzyner School of Law ( email )

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European Corporate Governance Institute (ECGI)

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