Law Commons^™

Who Are Quality Shareholders And Why You Should Care, Lawrence A. Cunningham

GW Law Faculty Publications & Other Works

Delaware may be the country's last best hope for maintaining balance and rationality in the country's system of corporate governance, as its policies advance the interests of quality shareholders, those with a deep and abiding interest in a particular corporation, rather than the agendas of assorted interest groups seeking to use the corporate form for parochial purposes. The text is based upon the 37th Annual Francis X. Pileggi Distinguished Lecture in Law which Professor Cunningham presented in February 2023 to the Delaware bench and bar and to the faculty and students of Delaware Law School.

Delaware Law For Non-Corporate Entities: A Commentary, Peter Molk

UF Law Faculty Publications

Robert Rhee’s Article, The Irrelevance of Delaware Corporate Law, poses provocative questions about why Delaware dominates the market for corporate law given the apparent irrelevance of state incorporation choice for companies’ market valuations. He shows, first, that publicly traded companies incorporated in Delaware have similar valuations to companies incorporated in other states over time, and second, that market actors do not exhibit a preference to reincorporate existing firms in Delaware.

Rhee analyzes exclusively the realm of publicly traded corporations, which is understandable given that his analysis is necessarily limited to publicly available data. Publicly traded corporations are undeniably economically significant, …

Is Corporate Law Nonpartisan?, Ofer Eldar, Gabriel V. Rauterberg

Law & Economics Working Papers

Only rarely does the United States Supreme Court hear a case with fundamental implications for corporate law. In Carney v. Adams, however, the Supreme Court had the opportunity to address whether the State of Delaware’s requirement of partisan balance for its judiciary violates the First Amendment. Although the Court disposed of the case on other grounds, Justice Sotomayor acknowledged that the issue “will likely be raised again.” The stakes are high because most large businesses are incorporated in Delaware and thus are governed by its corporate law. Former Governors and Chief Justices of Delaware lined up to defend the state’s …

Is Corporate Law Nonpartisan?, Ofer Eldar, Gabriel V. Rauterberg

Articles

Only rarely does the United States Supreme Court hear a case with fundamental implications for corporate law. In Carney v. Adams, however, the Supreme Court had the opportunity to address whether the State of Delaware’s requirement of partisan balance for its judiciary violates the First Amendment. Although the Court disposed of the case on other grounds, Justice Sotomayor acknowledged that the issue “will likely be raised again.” The stakes are high because most large businesses are incorporated in Delaware and thus are governed by its corporate law. Former Delaware governors and chief justices lined up to defend the state’s “nonpartisan” …

Champions For Justice 8th Annual, May 6, 2022, Roger Williams University School Of Law

School of Law Conferences, Lectures & Events

No abstract provided.

Law Library Blog (March 2022): Legal Beagle's Blog Archive, Roger Williams University School Of Law

Law Library Newsletters/Blog

No abstract provided.

Anonymous Companies, William J. Moon

Faculty Scholarship

Hardly a day goes by without hearing about nefarious activities facilitated by anonymous “shell” companies. Often described as menaces to the financial system, the creation of business entities with no real operations in sun-drenched offshore jurisdictions offering “zero percent” tax rates remains in vogue among business titans, pop stars, multimillionaires, and royals. The trending headlines and academic accounts, however, have paid insufficient attention to the legal uses of anonymous companies that are both ubiquitous and almost infinite in their variations.

This Article identifies privacy as a functional feature of modern business entities by documenting the hidden virtues of anonymous companies—business …

Artificially Intelligent Boards And The Future Of Delaware Corporate Law, Christopher Bruner

Scholarly Works

The prospects for Artificial Intelligence (AI) to impact the development of Delaware corporate law are at once over- and under-stated. As a general matter, claims to the effect that AI systems might ultimately displace human directors not only exaggerate the foreseeable technological potential of these systems, but also tend to ignore doctrinal and institutional impediments intrinsic to Delaware's competitive model – notably, heavy reliance on nuanced and context-specific applications of the fiduciary duty of loyalty by a true court of equity. At the same time, however, there are specific applications of AI systems that might not merely be accommodated by …

Delaware's Dominance, Wyoming's Dare: New Challenge, Same Outcome?, Pierluigi Matera

Faculty Scholarship

Despite increasing criticism, Delaware's dominance in corporate law has not experienced a significant decline: as of today, 67.8 percent of Fortune 500 companies are still incorporated in its jurisdiction. Nevada is known as Delaware's most important competitor, with an aggressive strategy that has overridden the efforts of any other jurisdiction. Yet, its success has been limited to a specific market segment: small firms with low institutional shareholding and high insider ownership.

Scholars suggest several explanations for both the rise and the staying power of Delaware. These explanations are essentially subsumed under the credible commitment theory and the network theory. According …

Optimizing The World’S Leading Corporate Law: A 20-Year Retrospective And Look Ahead, Lawrence Hamermesh, Jack B. Jacobs, Leo E. Strine Jr.

All Faculty Scholarship

In a 2001 article (Function Over Form: A Reassessment of Standards of Review in Delaware Corporation Law) two of us, with important input from the other, argued that in addressing issues like hostile takeovers, assertive institutional investors, leveraged buyouts, and contested ballot questions, the Delaware courts had done exemplary work but on occasion crafted standards of review that unduly encouraged litigation and did not appropriately credit intra-corporate procedures designed to ensure fairness. Function Over Form suggested ways to make those standards more predictable, encourage procedures that better protected stockholders, and discourage meritless litigation, by restoring business judgment rule …

Delaware's Global Competitiveness, William J. Moon

Faculty Scholarship

For about a hundred years, Delaware has been the leading jurisdiction for corporate law in the United States. The state, which deliberately embarked on a mission to build a haven for corporate law in the early twentieth century, now supplies corporate charters to over two thirds of Fortune 500 companies and a growing share of closely held companies. But Delaware’s domestic dominance masks the important and yet underexamined issue of whether Delaware maintains its competitive edge globally.

This Article examines Delaware’s global competitiveness, documenting Delaware’s surprising weakness competing in the emerging international market for corporate charters. It does so principally …

Is There A Delaware Effect For Controlled Firms?, Edward Fox

Articles

The impact of Delaware incorporation on firm value remains a central question in corporate law. Despite the difficulty scholars have had in agreeing on an answer to this question, there is a consensus that Delaware has long enjoyed stable and important advantages in the expertise of its judiciary and its extensive case law. These advantages are believed to be particularly important for firms with a controlling shareholder. This Article attempts to empirically measure the effect of Delaware incorporation on these controlled firms and thus helps us understand the market value of Delaware’s judiciary and case law. It finds, surprisingly, that …

Federal Forum Provisions And The Internal Affairs Doctrine, Dhruv Aggarwal, Albert H. Choi

Law & Economics Working Papers

A key question at the intersection of state and federal law is whether corporations can use their charters or bylaws to restrict securities litigation to federal court. In December 2018, the Delaware Chancery Court answered this question in the negative in the landmark decision Sciabacucchi v. Salzberg. The court invalidated “federal forum provisions” (“FFPs”) that allow companies to select federal district courts as the exclusive venue for claims brought under the Securities Act of 1933 (“1933 Act”). The decision held that the internal affairs doctrine, which is the bedrock of U.S. corporate law, does not permit charter and bylaw provisions …

Does Revlon Matter? A Empirical And Theoretical Study, Matthew D. Cain Ph. D., Sean J. Griffith, Robert J. Jackson Jr., Steven D. Solomon

Faculty Scholarship

We empirically examine whether and how the doctrine of enhanced judicial scrutiny that emerged from Revlon and its progeny actually affects M&A transactions. Combining hand-coding and machine-learning techniques, we assemble data from the proxy statements of publicly announced mergers between 2003 and 2017 into a dataset of 1,913 unique transactions. Of these, 1,167 transactions were subject to the Revlon standard, and 553 were not. After subjecting this sample to empirical analysis, our results show that Revlon does indeed matter for companies incorporated in Delaware. We find that in Delaware, Revlon deals are more intensely negotiated, involve more bidders, and result …

The Limited Effect Of “Maximum Effect”, Daniel S. Kleinberger, Douglas K. Moll

Faculty Scholarship

No abstract provided.

Mission Critical: How Fiduciary Duties Of Oversight Can Aid Corporations In Managing Stakeholder Interests, Krishna P. Pathak

Upper Level Writing Requirement Research Papers

After several public tragedies, corporate missteps, and catastrophes; politicians, certain investors, and other stakeholders have called for accountability in capitalism, proactive action to alleviate climate change, and performance of social obligations from corporations. The Business Roundtable and World Economic Forum have come out with proposals that signify a paradigm shift to the stakeholder approach to capitalism. Delaware, a haven for shareholder primacy, has permissive standards that allow a corporation to engage in any lawful business activity. However, concerns about fiduciary duties, especially the implied duties of good faith, legal compliance, and oversight, have created obligations for directors to engage in …

Land Of The Falling "Poison Pill" Understanding Defensive Measures In Japan On Their Own Terms, Alan K. Koh, Masafumi Nakahigashi, Dan W. Puchniak

Research Collection Yong Pung How School Of Law

Embraced by United States ("U.S.") managers in the 1980s as a lifeline in a sea of hostile takeovers, the poison pill fundamentally altered the trajectory of American corporate governance. When a hostile takeover wave seemed imminent in Japan in the mid-2000s, Japanese boards appeared to embrace this American invention with equal enthusiasm. Japan's experience should have been a ringing endorsement for the utility of American corporate governance solutions in foreign jurisdictions -but it was not to be. Japan's unique interpretation of the "poison pill" that was so eagerly adopted by Japanese companies in the mid-to-late 2000s has turned out to …

Corporate Charter Competition, Lynn M. Lopucki

UF Law Faculty Publications

The corporate charter competition has dominated the corporate law literature for four decades. This Article draws on the theoretical and empirical insights from that vast literature to present a systems analysis of the competition. The analysis shows the competition to be a system composed of three subsystems, joined by the internal affairs doctrine. The subsystems are those by which (1) corporations choose incorporation states, (2) states decide what packages to offer, and (3) states and stakeholders choose the courts that interpret and enforce corporate law. The analysis suggests that the standard account of charter competition should be revised in five …

Opportunity Makes A Thief: Corporate Opportunities As Legal Transplant And Convergence In Corporate Law, Martin Gelter, Geneviève Helleringer

Faculty Scholarship

The paper surveys the corporate opportunities doctrine in four jurisdictions: the US, the UK, Germany, and France. Our analysis enables us to trace the development of the doctrine, exposing the way in which certain models of dealing with a particular issue have arisen, and how these models have then spread. Fiduciary duties are often today held out as typical instruments of shareholder protection in the US and the UK, both of which are often held out as model jurisdictions in corporate governance internationally. However, fiduciary duties in these two jurisdictions often operate in strikingly different ways. While the US relies …

Governance By Contract: The Implications For Corporate Bylaws, Jill E. Fisch

All Faculty Scholarship

Boards and shareholders are increasing using charter and bylaw provisions to customize their corporate governance. Recent examples include forum selection bylaws, majority voting bylaws and advance notice bylaws. Relying on the contractual conception of the corporation, Delaware courts have accorded substantial deference to board-adopted bylaw provisions, even those that limit shareholder rights.

This Article challenges the rationale for deference under the contractual approach. With respect to corporate bylaws, the Article demonstrates that shareholder power to adopt and amend the bylaws is, under Delaware law, more limited than the board’s power to do so. As a result, shareholders cannot effectively constrain …

The Death Of Appraisal Arbitrage: Ending Windfalls For Deal Dissenters, William J. Carney, Keith Sharfman

Faculty Publications

In this article, we take note of a new and positive development in Delaware's law of appraisal: more robust enforcement of Section 262(h), which expressly excludes from fair value in appraisal litigation the value that is uniquely associated with the deal from which the shareholders seeking appraisal are dissenting. For public firms, this implies that deal dissenters are entitled to no more than the price that prevailed prior to the deal's announcement.

In a salutary development, the Delaware Chancery Court took this approach in its recent appraisal decision in Verition Master Fund Partners, Ltd. v. Aruba Networks, Inc., awarding …

A Rule-Based Method For Comparing Corporate Laws, Lynn M. Lopucki

UF Law Faculty Publications

Part I explains the processes for specifying a Scenario. It introduces the Scenario that will serve as the illustration in the remainder of this Article—a comparison of the liability of directors for the exercise of poor judgment in a Delaware corporation with the corresponding liability in a United Kingdom public limited company. Part II explains and illustrates the necessity of selecting specific entity types for comparison. Part III describes and illustrates the method for resolving the Scenario in both jurisdictions. Part IV explains and illustrates the novel process for close comparison—the extraction, juxtaposition, and comparison of decisional rules from the …

Contracting Out Of The Fiduciary Duty Of Loyalty: An Empirical Analysis Of Corporate Opportunity Waivers, Gabriel Rauterberg, Eric Talley

Articles

For centuries, the duty of loyalty has been the hallowed centerpiece of fiduciary obligation, widely considered one of the few “mandatory” rules of corporate law. That view, however, is no longer true. Beginning in 2000, Delaware dramatically departed from tradition by granting incorporated entities a statutory right to waive a crucial part of the duty of loyalty: the corporate opportunities doctrine. Other states have since followed Delaware’s lead, similarly permitting firms to execute “corporate opportunity waivers.” Surprisingly, more than fifteen years into this reform experiment, no study has attempted to either systematically measure the corporate response to these reforms or …

Perfectly Frank: A Reflection On Quality Lawyering In Honor Of R. Franklin Balotti, Leo E. Strine Jr., James J. Hanks Jr., John F. Olson, A. Gilchrist Sparks, E. Norman Veasey, Gregory P. Williams

All Faculty Scholarship

This essay honoring the late R. Franklin Balotti focuses upon certain of the key attributes necessary to practice business law effectively and ethically. Among these attributes are a strong work ethic, the integrity to stand behind your own advice and candidly admit when things do not go according to plan, empathy for how others will view your client’s actions and the ability to communicate that perception to your client, the confidence to change the pace of a transaction when a slow down or time out is warranted, and the ability to have some fun and laugh (even at yourself). Perhaps …

Delineating The Implied Covenant And Providing For “Good Faith”, Daniel S. Kleinberger

Faculty Scholarship

This column considers whether an operating or partnership agreement can delineate the implied contractual obligation, comparing ULLCA and the Delaware Act, and then warns of the dangers of carelessly imposing by contract an express requirement of "good faith."

The Bylaw Puzzle In Delaware Corporate Law, David A. Skeel Jr.

All Faculty Scholarship

In less than a decade, Delaware’s legislature has overruled its courts and reshaped Delaware corporate law on two different occasions, with proxy access bylaws in 2009 and with shareholder litigation bylaws in 2015. Having two dramatic interventions in quick succession would be puzzling under any circumstances. The interventions are doubly puzzling because with proxy access, Delaware’s legislature authorized the use of bylaws or charter provisions that Delaware’s courts had banned; while with shareholder litigation, it banned bylaws or charter provisions that the courts had authorized. This Article attempts to unravel the puzzle.

I start with corporate law doctrine, and find …

The Stereotyped Offender: Domestic Violence And The Failure Of Intervention [Batterer Intervention Program (Bip) Standards Data, As Of 2015], Carolyn B. Ramsey

Research Data

These 19 comparative data tables relating to state and local certification standards for batterer intervention programs (BIPs), as of 2015, are electronic Appendices B-T to Carolyn B. Ramsey, The Stereotyped Offender: Domestic Violence and the Failure of Intervention, 120 Penn. St. L. Rev. 337 (2015), available at http://scholar.law.colorado.edu/articles/56/. Appendix A is not reproduced here because it simply contains citations to the state and local standards, but it is published with the journal article.

Trending @ Rwu Law: Professor Tanya Monestier's Post: Is Corporate Registration A Proper Basis For General Jurisdiction?: 02-09-2016, Tanya Monestier

Law School Blogs

No abstract provided.

Delaware's Familiarity, Brian J. Broughman, Darian M. Ibrahim

Faculty Publications

No abstract provided.

Is Corporate Patriotism A Virtue?, David Yosifon

Faculty Publications

American social and political discourse attests to widespread concern about whether domestic corporations can be counted on to serve the national interest. This issue is especially pressing in an era of international corporate operations, in which firms can send jobs and tax revenues overseas, devastating local communities even as they boost the prospects of workers in a foreign land, and the interests of capital spread across the globe. Firms founded in America can also disperse across the border productive resources that could otherwise be nationalized or made available to the homeland in times of crisis or war. Indeed, the shareholder …