Ian Edwards (Cape Cod Center for Sustainability) has posted Estranged Prudence: Operational Proxies and the Abstraction of Fiduciary Judgment on SSRN. Here is the abstract:
This Essay examines how late-twentieth-century fiduciary practice at institutional-investor scale did not alter the governing doctrine of prudence but changed what became visible as proof of prudence. Prudence remains a doctrine of fiduciary judgment exercised with loyalty, for the exclusive benefit of beneficiaries, under circumstances then prevailing. Yet institutional fiduciary practice increasingly demonstrates compliance through operational proxies — including diversification, benchmarking, consultant review, delegation, and portfolio theory — that may be relevant evidence of prudence without being substitutes for fiduciary judgment itself.
Using trust-law prudence as a baseline and the Employee Retirement Income Security Act (ERISA) as a contemporary application, the Essay examines whether operational demonstrations of compliance continue to make beneficiary-oriented fiduciary judgment visible or instead function as practical substitutes for it. The Essay argues that fiduciary doctrine remains formally intact, but that institutional demonstrations of prudence increasingly rely upon administrable proxies whose relationship to fiduciary judgment is indirect, assumed, or difficult to observe.
The resulting concern is not doctrinal change but doctrinal visibility. If prudence remains a conduct standard, the conduct required by prudence must remain capable of being observed, evaluated, and enforced.
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