Fiduciary Duty in Complex Organizations

Abstract

Fiduciary duty remains a foundational principle in institutional governance, yet its evaluation has become increasingly challenging as organizations grow more complex, delegated, and model-informed. Traditional assessments that rely heavily on outcomes or ex post performance provide weak signals of fiduciary quality in environments characterized by uncertainty and fragmented accountability. This paper reframes fiduciary duty as a decision-making discipline under uncertainty and argues that fiduciary failure is most often a governance design problem rather than a single bad decision. It introduces a Process-Based Fiduciary Assessment framework that enables fiduciary boards and oversight bodies to evaluate decision integrity through governance structure, uncertainty management, incentive alignment, monitoring, and escalation capacity. By shifting oversight focus from outcomes to process quality, the framework supports proportional oversight, preserves legitimate risk-taking, and strengthens institutional accountability across asset classes and organizational forms.

Key Implications

• Fiduciary integrity is most defensibly evaluated through process quality under uncertainty rather than through outcome-based judgment.
• Most fiduciary breakdowns are predictable consequences of weak governance architecture—unclear decision rights, unmanaged assumptions, and ineffective escalation—not isolated errors.
• Delegation changes execution location, not fiduciary responsibility; oversight capacity must be designed to remain credible after authority is transferred.
• Model reliance introduces fiduciary risk when it displaces judgment; governance must make assumptions, limits, and overrides explicit and reviewable.
• A proportional process-based framework can strengthen accountability without narrowing discretion or penalizing legitimate risk-taking.

Keywords

Fiduciary duty; governance design; decision-making under uncertainty; delegation; incentive alignment; monitoring and escalation; model risk; process-based oversight; institutional governance

Recommended citation: Sing, C. H. (2023). Fiduciary duty in complex organizations: Decision-making under uncertainty. Working paper.
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