Before I get started on the meat of this week’s post, I just want to take a brief moment to say I am honored and delighted that, at the Journal of Corporation Law’s invitation, Steve Bainbridge wrote a response to my paper, The Legitimation of Shareholder Primacy.
Steve’s response, which you can find on SSRN here, is not so much as a rebuttal as it is a complement. (He also has a couple of shorter blog posts, here and here.) I approach the recent controversies in corporate law – and DExit in particular – as arising out of an ongoing need among corporate actors to legitimate the power that corporations wield and the legal system that sustains that power; Steve approaches the matter through an interest group lens. He characterizes Delaware lawmaking as an exercise in balancing the different interests of the legislature, bar, and judiciary, and analyzes the recent contretemps from that vantagepoint. As he explains, our different takes are not mutually exclusive, and I think he is exactly right in terms of the delicate balancing act that the different Delaware actors must perform. If I have anything to add, it’s only this: Steve recognizes that these three actors are all involved in the mutually-beneficial project of enhancing Delaware’s franchise, but also puts their specific interests at odds. I tend to view the problem as more short-term/long-term; choices that immediately retain incorporations – like hasty legislation – may do longer term reputational damage, and hobble production of the cases Delaware needs to keep its law relevant. It’s not an easy problem to solve.
Moving on –
I am in no way a contracts expert but every now and then I kind of marvel at the contract catastrophes that come out of Delaware, and recently there were three doozys. With the caveat that, as not-a-contracts-professor, I am not at all familiar with the background caselaw so any commentary of mine is just gut reaction, here we go.
And – whoops this got long, under the cut it goes.