Law Commons^™

The Independent Board As Shield, Gregory H. Shill

Washington and Lee Law Review

The fiduciary duty of loyalty bars CEOs and other executives from managing companies for personal gain. In the modern public corporation, this restriction is reinforced by a pair of institutions: the independent board of directors and the business judgment rule. In isolation, each structure arguably promotes manager fidelity to shareholder interests—but together, they enable manager prioritization. This marks a particularly striking turn for the independent board. Its origin story and raison d’être lie in protecting shareholders from opportunism by managers, but it functions as a shield for managers instead.

Numerous defects in the design and practice of the independent board …

Real Insider Trading, Michael A. Perino

Washington and Lee Law Review

In popular rhetoric, insider trading cases are about leveling the playing field between elite market participants and ordinary investors. Academic critiques vary. Some depict an untethered insider trading doctrine that enforcers use to expand their power and enhance their discretion. Others see enforcers beset with agency cost problems who bring predominantly simple, easily resolved cases to create the veneer of vigorous enforcement. The debate has, to this point, been based mostly on anecdote and conjecture rather than empirical evidence. This Article addresses that gap by collecting extensive data on 465 individual defendants in civil, criminal, and administrative actions to assess …

Adversarial Failure, Benjamin P. Edwards

Washington and Lee Law Review

Investors, industry firms, and regulators all rely on vital public records to assess risk and evaluate securities industry personnel. Despite the information’s importance, an arbitration-facilitated expungement process now regularly deletes these public records. Often, these arbitrations recommend that public information be deleted without any true adversary ever providing any critical scrutiny to the requests. In essence, poorly informed arbitrators facilitate removing public information out of public databases. Interventions aimed at surfacing information may yield better informed decisions. Although similar problems have emerged in other contexts when adversarial systems break down, the expungement process to purge information about financial professionals provides …

Contract Design, Default Rules, And Delaware Corporate Law, Jeffrey Manns, Robert Anderson

Washington and Lee Law Review

Incomplete contract theory recognizes that contracts cannot be comprehensive and that state law necessarily has to fill in gaps when conflicts arise. The more complex the transaction, the more that lawyers face practical constraints that force them to limit the scope of drafting and broadly rely on legal defaults and open-ended terms to plug holes and address contingencies. In theory Delaware law serves as lawyers’ preferred jurisdiction and forum for merger and acquisition (M&A) transactions and other high-end corporate deals because of the state’s superior default rules for corporate law and its judiciary’s expertise in discerning the “hypothetical bargain” of …

Delaware As Deal Arbiter, Christina M. Sautter

Washington and Lee Law Review

Most would agree that the Delaware courts are the leading jurists in the resolution of corporate conflicts, particularly in the Mergers & Acquisitions (M&A) context. Arguably a greater role that Delaware plays is that of a norm setter, both with respect to the expectations of management conduct in the M&A process and with respect to deal terms, particularly deal protection devices. Like in any relationship, there is a “give and take” between practitioners and Delaware. That is, practitioners are “on the front lines,” often innovating with respect to new deal structures and deal terms. After some time, Delaware has the …

The Lost Lessons Of Shareholder Derivative Suits, Jessica Erickson

Washington and Lee Law Review

Merger litigation has changed dramatically. Today, nearly every announcement of a significant merger sparks litigation, and these cases look quite different from merger cases in the past. These cases are now filed primarily outside of Delaware, they typically settle without shareholders receiving any financial consideration, and corporate boards now have far more ex ante power to shape these cases. Although these changes are often heralded as unprecedented, they are not. Over the past several decades, derivative suits experienced many of the same changes. This Article explores the similarities between the recent changes in merger litigation and the longer history of …