Jill E. Fisch
- Published in print:
- 2019
- Published Online:
- September 2019
- ISBN:
- 9780226599403
- eISBN:
- 9780226599540
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226599540.003.0011
- Subject:
- Law, Company and Commercial Law
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 ...
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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 board’s adoption of bylaws with which they disagree. The resulting power imbalance offers reasons to question the scope of the contract paradigm. This analysis has two implications. First, it suggests that the Delaware courts and possibly the legislature may want to re-consider existing constraints on shareholder power in order to realize the contractual paradigm fully. In so doing, they will have to consider the normative implications of greater shareholder empowerment. Second, to the extent that Delaware law retains the existing limitations on shareholder power, this analysis suggests that courts should scrutinize board-adopted bylaws more closely.Less
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 board’s adoption of bylaws with which they disagree. The resulting power imbalance offers reasons to question the scope of the contract paradigm. This analysis has two implications. First, it suggests that the Delaware courts and possibly the legislature may want to re-consider existing constraints on shareholder power in order to realize the contractual paradigm fully. In so doing, they will have to consider the normative implications of greater shareholder empowerment. Second, to the extent that Delaware law retains the existing limitations on shareholder power, this analysis suggests that courts should scrutinize board-adopted bylaws more closely.
Steven Davidoff Solomon and Randall Stuart Thomas (eds)
- Published in print:
- 2019
- Published Online:
- September 2019
- ISBN:
- 9780226599403
- eISBN:
- 9780226599540
- Item type:
- book
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226599540.001.0001
- Subject:
- Law, Company and Commercial Law
Enormous changes are occurring in our capital markets as shareholder activists become increasingly prominent, institutional investors gain power, and capital markets intermediaries such as proxy ...
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Enormous changes are occurring in our capital markets as shareholder activists become increasingly prominent, institutional investors gain power, and capital markets intermediaries such as proxy advisory firms play increasingly important roles. Corporations, and their boards of directors, are also increasingly uncertain how to respond to these new dynamics and adhere to predefined fiduciary duties to stockholders. The uncertainty has led to schizophrenic responses,, including the increasing use of dual-class stock and wholesale corporate governance changes of uncertain validity designed to fight off or placate certain shareholder groups. We believe that these enormous changes merit a review of corporate law to examine needed adjustments for these revolutionary times. For example, much of the case law governing corporate conduct was created in another time–the 1980s–and designed to meet another disruptive force–hostile takeovers. Is it time to reexamine this case law and create new laws for possibly different threats? Alternatively, statutory laws such as the rules governing appraisal rights seem ripe for a complete review in the wake of appraisal arbitrage. In this book, we bring together many of the leading scholars of Delaware corporate law to examine these issues. The fourteen chapters, and a judicial overview by Delaware Chief Justice Leo E. String Jr., cast light on the current tensions in Delaware law and how Delaware’s courts and legislature should address them.Less
Enormous changes are occurring in our capital markets as shareholder activists become increasingly prominent, institutional investors gain power, and capital markets intermediaries such as proxy advisory firms play increasingly important roles. Corporations, and their boards of directors, are also increasingly uncertain how to respond to these new dynamics and adhere to predefined fiduciary duties to stockholders. The uncertainty has led to schizophrenic responses,, including the increasing use of dual-class stock and wholesale corporate governance changes of uncertain validity designed to fight off or placate certain shareholder groups. We believe that these enormous changes merit a review of corporate law to examine needed adjustments for these revolutionary times. For example, much of the case law governing corporate conduct was created in another time–the 1980s–and designed to meet another disruptive force–hostile takeovers. Is it time to reexamine this case law and create new laws for possibly different threats? Alternatively, statutory laws such as the rules governing appraisal rights seem ripe for a complete review in the wake of appraisal arbitrage. In this book, we bring together many of the leading scholars of Delaware corporate law to examine these issues. The fourteen chapters, and a judicial overview by Delaware Chief Justice Leo E. String Jr., cast light on the current tensions in Delaware law and how Delaware’s courts and legislature should address them.
Steven Davidoff Solomon and Randall Stuart Thomas (eds)
- Published in print:
- 2019
- Published Online:
- September 2019
- ISBN:
- 9780226599403
- eISBN:
- 9780226599540
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226599540.003.0015
- Subject:
- Law, Company and Commercial Law
This book was inspired by a conference held on April 14 and 15, 2016 also titled "The Corporate Contact in Changing Times: Is the Law Keeping Up?". This book is a collection of the papers presented ...
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This book was inspired by a conference held on April 14 and 15, 2016 also titled "The Corporate Contact in Changing Times: Is the Law Keeping Up?". This book is a collection of the papers presented at that conference, and a modest attempt to bring more understanding and cohesion to future corporate law.Less
This book was inspired by a conference held on April 14 and 15, 2016 also titled "The Corporate Contact in Changing Times: Is the Law Keeping Up?". This book is a collection of the papers presented at that conference, and a modest attempt to bring more understanding and cohesion to future corporate law.
