RESOLVING THE SUBSIDIARY DIRECTORS DILEMMA

This Article examines the fiduciary duties owed by directors of subsid iary corporations in light of traditional coprorate law and the specia l circumstances of the parent-subsidiary relationship. In some circums tances corporate law imposes upon directors duties running not only to the shareholders but also to nonshareholder constituencies such as '' the corporation'' or creditors. In the parent-subsidiary context, impo sing duties that run to any group other than shareholders places the d irectors in an untenable position. Professor Gouvin argues that in the parent-subsidiary context, directors of subsidiaries should be held t o owe a duty solely to their parent shareholder. Any duties that corpo rate directors ordinarily owe to nonshareholders, including a duty to the ''corporation'' defined broadly, should be imposed directly on the parent shareholder rather than on the individual directors of the sub sidiary. Such a scheme would relieve subsidiary directors of the dilem ma created by the practical necessity of doing the shareholder's biddi ng and the concurrent vulnerability to attacks by other constituencies , especially ''the corporation,'' for failure to discharge duties to n onshareholders. This problem is especially pronounced in industries su bject to heavy regulation, such as the banking industry, in which domi nant form of ownership is the holding company but third parties such a s regulators would have standing to bring claims on behalf of the regu lated subsidiary.