Previously, I posted about Margaret Blair’s paper on concession theory, where she argued that the state played an integral role in the development of the corporate form, disputing those who argue that corporations could be somewhat replicated via private contracting. 

The latest entry in this genre is a new paper by Taisu Zhang and John Morley, The Modern State and the Rise of the Business Corporation.  They adopt a somewhat narrower definition of corporation to mean something like a large, publicly traded, limited liability entity, and argue that its rise is necessarily linked to the development of a state apparatus capable of recognizing and enforcing the rights of disparate investors, including the development of a uniform, professionalized court system.  They make their argument through a series of cross-cultural case studies, the most fascinating (and convincing) of which is 19^th and early 20^th century China.  According to the paper, at this time, China’s economy had grown to the point where it needed something like the corporate form, and corporations were in fact statutorily authorized, but China’s weak central state meant that there were few takers.  It wasn’t until the middle of the 20^th century that China…

Dear BLPB Readers,

Great news!!! A Symposium on The Changing Faces of Business Law and Sustainability is being held this Friday and Saturday!!!  This Symposium is being hosted by the Business and Human Rights Initiative at the University of Connecticut, the Center for the Business of Sustainability, Smeal College of Business, Penn State University, the College of Business at Oregon State University, and the American Business Law Journal.  All are welcome!  I encourage interested readers to register and attend all or part of the event.  The Symposium schedule is here.  I’m grateful to be an invited participant and am really looking forward to the event and to discussing Derivatives and ESG!  Hope to (virtually) see many of you there!     

Dear BLPB Readers:

For those of you who missed Vice Chancellor Travis Laster’s stellar talk on “Big Law Ethics” this past Thursday or would like access to a recording of the talk, here is a link.   

I am so amused by this brief opinion in Manti Holdings v. The Carlyle Group.

The case is a continuation of Manti Holdings, LLC v. Authentix Acquisition Co.  There, as many of you know, the Delaware Supreme Court held that a shareholder agreement among sophisticated investors in a private company could waive appraisal rights associated with a merger.

Well, the same shareholders who sought appraisal are now instead suing for breach of fiduciary duty in connection with the merger, and the defendants argued that the same shareholder agreement not only waived appraisal rights, but also waived the right to sue for breach of fiduciary duty.  We know, of course, that you cannot waive fiduciary duties in corporate constitutive documents; the question for VC Glasscock was whether you can waive them in personally-negotiated shareholder agreements.  Glasscock held that he did not need to reach that question, because even if such waiver was possible, the agreement here was not clear about it. 

But his reasoning is what fascinates me.

The agreement required that shareholders “consent to and raise no objections against such transaction,” i.e., the merger, thus raising the question whether an action for fiduciary breach is the equivalent of…

Robert Miller has posted How Would Directors Make Business Decisions Under a Stakeholder Model? on SSRN (here).  The abstract:

Strong forms of the stakeholder model of corporate governance hold that, in making business decisions, directors should consider the interests of all corporate constituencies (employees, customers, suppliers, shareholders, etc.) in such a way that directors may sometimes decide to transfer value to a non-shareholder constituency even though doing so produces no net benefit for shareholders even in the long-term. This article makes four main points about the stakeholder model. First, although its advocates often speak as if the model placed all corporate constituencies on a par, in fact the model uniquely disadvantages shareholders: since the claims of other constituencies arise in contract or by law, directors have no power to invade these claims for the benefit of shareholders; hence, business decisions made under a stakeholder model will often transfer value from shareholders to other constituencies but never from other constituencies to shareholders. Second, although critics of the stakeholder model have long argued that the model provides no definite standard by which directors may decide what to do in particular cases, this greatly understates the point. In fact, the stakeholder…