Directorial Fiduciary Duties in a Tracking Stock Equity Structure: The Need for a Duty of Fairness

Part I of this article briefly describes the key distinctions between a tracking stock corporation and a conventional corporation. It then touches on the reasons why corporations have adopted tracking stock equity structures. Part II articulates the unique legal challenges presented by a tracking stock equity structure. Part III discusses the disclosure that tracking stock corporations have made with respect to these challenges. Part IV briefly summarizes the fiduciary duties of care and loyalty and explores why these duties are ill-equipped to address these challenges. Part V presents the duty of fairness and discusses the duty’s elements in detail. In addition, Part V sets forth practical advice as to what tracking stock boards can do today to help minimize their exposure to litigation that may be commenced by disgruntled tracking stock stockholders in the future.