Open Access. Powered by Scholars. Published by Universities.®

Law Commons

Open Access. Powered by Scholars. Published by Universities.®

Contracts

Theory of the firm

University of Pennsylvania Carey Law School

Articles 1 - 1 of 1

Full-Text Articles in Law

Stealth Governance: Shareholder Agreements And Private Ordering, Jill E. Fisch Jan 2022

Stealth Governance: Shareholder Agreements And Private Ordering, Jill E. Fisch

All Faculty Scholarship

Corporate law has embraced private ordering -- tailoring a firm’s corporate governance to meet its individual needs. Firms are increasingly adopting firm-specific governance through dual-class voting structures, forum selection provisions and tailored limitations on the duty of loyalty. Courts have accepted these provisions as consistent with the contractual theory of the firm, and statutes, in many cases, explicitly endorse their use. Commentators too support private ordering for its capacity to facilitate innovation and enhance efficiency.

Private ordering typically occurs through firm-specific charter and bylaw provisions. VC-funded startups, however, frequently use an alternative tool – shareholder agreements. These agreements, which have …