The Corporate Counsel and Pro Bono Service
Robert L. Hill and Thomas J. Calvocoressi, 42(3): 675–96 (May 1987)
This Article briefly examines the history of the delivery of legal services to the indigent in the United States and the corporate lawyer's obligation to provide pro bono service under the ABA Model Code of Professional Responsibility and the ABA Model Rules of Professional Conduct. It also reviews a number of active corporate law department pro bono programs and the role played by the American Bar Association and the American Corporate Counsel Association in encouraging these programs. Finally, it offers solutions to some potential problems corporate counsel might encounter in providing pro bono services.
Arbitration of Antitrust Claims: Opportunities and Hazards for Corporate Counsel
Donald I. Baker and Mark R. Stabile, 48(2): 395–436 (Feb. 1993)
Since 1985, the U.S. Supreme Court has eliminated the federal district court as the sole forum for trying antitrust and other federal statutory claims. The Court has created the opportunity for parties to arbitrate the types of antitrust disputes that have been such a prolific source of conflict in distribution, licensing, franchising, and joint venture relationships. In so doing, the Court also has created the new risk that a party can be forced to arbitrate an antitrust dispute under an old arbitration clause that was never designed for this purpose. In this Article, the authors emphasize that arbitration is a creature of contract. They urge prompt review of existing arbitration clauses and suggest that any arbitration clause either exclude antitrust claims from its coverage or provide procedures suitable for resolution of future antitrust disputes.
The Organizational Sentencing Guidelines and the Employment At-Will Rule as Applied to In-House Counsel
Joseph J. Fleischman, William J. Heller, and Mitchell A. Schley, 48(2): 611–32 (Feb. 1993)
Under the Organizational Sentencing Guidelines, in-house counsel have increased responsibilities which may necessitate disclosure of corporate wrongdoing. The in-house lawyer who advises disclosure increases the risk that he or she will be fired for disloyalty to management or to the corporation. The Guidelines may, however, articulate a new public-policy exception to the employment at-will rule, which, as applied to in-house lawyers, previously has foreclosed any cause of action.
Liability Insurance: A Primer for Corporate Counsel
Eugene R. Anderson, Joseph D. Tydings, and Joan L. Lewis, 49(1): 259–94 (Nov. 1993)
The key to unlocking the insurance coverage afforded by a corporation's liability insurance policies lies in understanding the policy itself and the services it promises to provide. This Article explains certain fundamental liability insurance concepts with which in-house counsel should be familiar.
Extrajurisdictional Practice by Lawyers
William T. Barker, 56(4): 1501 (Aug. 2001)
Business and the economy are increasingly becoming global in structure, with little respect for national boundaries, let alone those of individual states. Yet licensure to practice law is almost exclusively the province of individual states. Litigators can avoid the most serious limits this regulatory scheme imposes by obtaining admission pro hac vice. Transactional lawyers have no similar mechanism to obtain authorization to practice in states where they are not admitted generally. Although efforts to reform current law in this area are ongoing, practicing lawyers must make decisions about what they can and cannot do under existing law. This Article focuses on that question, evaluating various lines of analysis applicable to particular types of activities. An understanding of this analysis should be useful to lawyers trying to shape their practices in ways that will best serve their clients, while avoiding improper activities. It may also be useful to reformers looking for ways to take modest steps in directions where larger steps do not seem feasible.
The Lawyer as Director of a Client
The Committee on Lawyer Business Ethics of the ABA Section of Business Law , 57(1): 387 (Nov. 2001)
Empty Voting and Hidden (Morphable) Ownership: Taxonomy, Implications, and Reforms
Henry T. C. Hu and Bernard Black, 61(3):1011–1070 (May 2006)
Most American publicly held corporations have a one-share, one-vote structure, in which voting power is proportional to economic ownership. This structure gives shareholders economic incentives to exercise their voting power well and helps to legitimate managers' exercise of authority over property the managers do not own. Berle-Means' "separation of ownership and control" suggests that shareholders face large collective action problems in overseeing managers. Even so, mechanisms rooted in the shareholder vote, including proxy fights and takeover bids, constrain managers from straying too far from the goal of shareholder wealth maximization.
In the past few years, the derivatives revolution, hedge fund growth, and other capital market developments have come to threaten this familiar pattern throughout the world. Both outside investors and corporate insiders can now readily decouple economic ownership of shares from voting rights to those shares. This decoupling—which we call "the new vote buying"—is often hidden from public view and is largely untouched by current law and regulation. Hedge funds, sophisticated and largely unfettered by legal rules or conflicts of interest, have been especially aggressive in decoupling. Sometimes they hold more votes than economic ownership, a pattern we call "empty voting." That is, they may have substantial voting power while having limited, zero, or even negative economic ownership. In the extreme situation of negative economic ownership, the empty voter has an incentive to vote in ways that reduce the company's share price. Sometimes hedge funds hold more economic ownership than votes, though often with "morphable" voting rights—the de facto ability to acquire the votes if needed. We call this "hidden (morphable) ownership" because under current disclosure rules, the economic ownership and (de facto) voting ownership are often not disclosed. Corporate insiders, too, can use new vote buying techniques.
This article analyzes the new vote buying and its corporate governance implications. We propose a taxonomy of the new vote buying that unpacks its functional elements. We discuss the implications of decoupling for control contests and other forms of shareholder oversight, and the circumstances in which decoupling could be beneficial or harmful to corporate governance. We also propose a near-term disclosure-based response and sketch longer-term regulatory possibilities. Our disclosure proposal would simplify and partially integrate five existing, inconsistent share-ownership disclosure regimes, and is worth considering independent of its value with respect to decoupling. In the longer term, other responses may be needed; we briefly discuss possible strategies focused on voting rights, voting architecture, and supply and demand forces in the markets on which the new vote buying relies.
Independent Directors as Securities Monitors
Hillary A. Sale, 61(4):1375-1412 (August 2006)
This paper considers the role of independent directors of public companies as securities monitors. Rather than engaging in the debate about whether independent directors are good or bad, important or unimportant, the paper takes their existence and basic governance role as a given, focusing instead on what recent statements from Securities and Exchange Commission officials indicating an increased focus on independent directors and their role in preventing securities fraud. The paper notes that the SEC believes that independent directors are on the board to act, at least in part, as securities monitors. This securities monitor role is another aspect of the information-forcing-substance disclosure model that the SEC has used to achieve improved corporate governance. Although directors face heightened risk when they draft or sign disclosure documents, they also have an ongoing responsibility to be informed of developments within the company, ensure good processes for accurate disclosures, and make reasonable efforts to assure that disclosures are adequate. Independent directors with expertise should be involved in reviewing and, sometimes, drafting statements. All directors, however, should be fully aware of the company's press releases, public statements, and communications with security holders and sufficiently engaged and active to question and correct inadequate disclosures. In addition to defining the role of independent directors as securities monitors, the article reviews the liability independent directors might face under private causes of action and contrasts it with the SEC's enforcement powers and remedies. The article describes some of the SEC's prior statements that emphasize the role of independent directors as securities monitors and the importance of their providing both guidance and check and balance.
The Uncertain Efficacy of Executive Sessions Under the NYSE's Revised Listing Standards
Robert V. Hale II, 61(4):1413-1426 (August 2006)
This article briefly explores key issues relating to the use of non-management executive sessions under Section 303A.03 of the NYSE's revised listing standards, including the authority of the SEC to enforce such a requirement, the status of board actions taken at such meetings, and whether such sessions may result in altering the principal roles of the board and management. In this respect, the Disney derivative litigation affords an opportunity to consider the use of executive sessions in relation to these issues, as well as the business judgment rule. Moreover, Disney raises the question whether mandatory non-management executive sessions might have created a different outcome under the circumstances in the case. The article concludes with a discussion of some practical considerations for attorneys and corporate secretaries in complying with the requirement.
The Tensions, Stresses, and Professional Responsibilities of the Lawyer for the Corporation
E. Norman Veasey and Christine T. Di Guglielmo, 62(1): 1–36 (Nov. 2006)
The lawyer for the corporation—whether general counsel, subordinate in-house counsel, or outside counsel—faces tensions, stresses, and professional responsibilities that often differ from those of lawyers who represent individuals. The primary reality that must be faced is that this lawyer's client is—or should be—only the corporate entity.
This article is an attempt to highlight some of the issues that corporate counsel, directors, and managers should seek to recognize and understand. The various challenges faced by both in-house and outside lawyers representing corporations include the maintenance of professional independence, dealing with "up-the-ladder" reporting obligations, seeking to serve the client's best interests through persuasive counseling, the separation of legal and business advice, and dealing with internal investigations, to name a few.
Moreover, in the case of general counsel, special tensions arise because he or she has only one client (the general counsel's employer) and answers both to the CEO and to the board of directors. When these two "bosses" have potential differences or conflicts, the tensions placed on the general counsel may be palpable and difficult to manage consistently with the lawyer's ethical duties, advancement of corporate interests, and job security. Most general counsel are up to the task and do not take the difficulties of their challenges for granted. It is also important, in our view, that directors understand corporate counsel's roles and challenges, as well as the value that counsel brings to the board's responsibilities.
We attempt to address questions of how to establish and fulfill counsel's obligation to be independent, when to advise the corporate actors to seek outside counsel, when to go up the ladder and to summon up the courage to do the right thing. Although we have tried to survey as much of the practical learning and the literature as is reasonable for an article, we believe we have only scratched the surface.
Calling All Deal Lawyers—Try Your Hand at Resolving Disputes
James C. Freund, 62(1): 37–54 (November 2006)
This article is intended as a wake-up call to deal lawyers, inside corporate counsel, and others who negotiate agreements in the commercial world—urging them to become more involved in resolving business disputes by negotiation and, where appropriate, through mediation. The author makes the case that deal lawyers—who too often defer to litigators to handle these matters—ought to apply their problem-solving skills, ability to strike advantageous compromises of tough transactional issues, and negotiating prowess to the resolution of disputes. The article includes a discussion of why settlement usually makes more sense than going to trial, why resolving disputes is so difficult, the reasons that many deal lawyers don't get involved, why they should, early steps to prevent disputes from ending up in litigation, and how mediation can be helpful to reach negotiated solutions.
Internal Investigations and the Defense of Corporations in the Sarbanes-Oxley Era
Robert S. Bennett, Alan Kriegel, Carl S. Rauh, and Charles F. Walker, 62(1): 55–88 (Nov. 2006)
Internal investigations long have been an integral part of the successful defense of corporations against charges of misconduct, as well as an important board and management tool for assessing questionable practices. With the heightened standards of conduct and increased exposure created by Sarbanes-Oxley, this essential instrument for safeguarding corporate interests has become even more crucial in identifying and managing risk in the enforcement arena. This article examines from a practitioner's standpoint when and how internal investigations should be conducted in order to protect the corporation in criminal, civil and administrative proceedings. Particular attention is paid to the issues created by a concurrent government investigation and in dealing with employees and former employees in the course of an investigation. The article also addresses the role of the Audit Committee under Sarbanes-Oxley, and the important issue of reporting the findings of the investigation to appropriate corporate officials. The subject of self-reporting by the Company to enforcement authorities is considered as well. In this context, the article explores the SEC's position on crediting self-reporting and cooperation as set forth in the Seaboard report; Department of Justice policy as embodied in the Thompson Memorandum; and the impact of the Federal Sentencing Guidelines for Organizations.
An Uninvited Guest: Class Arbitration and the Federal Arbitration Act's Legislative History
David S. Clancy and Matthew M.K. Stein, 63(1): 55–80 (November 2007)
In recent years, there has been an explosion of "class arbitrations"—arbitration proceedings in which the claimant purports to represent a class of absent individuals. In this Article, the authors examine the legislative history of the Federal Arbitration Act ("FAA"), and argue that, in enacting the FAA, Congress intended to open the door to non–judicial dispute resolution proceedings with particular fundamental characteristics, and that class arbitration proceedings do not have those characteristics. The authors argue that class arbitration is therefore a novel type of non–judicial dispute resolution neither reviewed nor approved by Congress, and that, as a result, this "uninvited guest" should be subjected to close legal and public–policy scrutiny. The authors also identify multiple areas of particular concern, including, for example, that courts have been reviewing class arbitration decisions under the traditional standard of review highly deferential to arbitrators, suggesting that we are on a path toward the quiet establishment of a forum that adjudicates disputes involving hundreds, thousands, or even tens of thousands of individuals in decisions that are effectively unreviewable.
Applying Stoneridge to Restrict Secondary Actor Liability Under Rule 10b-5
Todd G. Cosenza, 64(1): 59-78 (November 2008)
Although the U.S. Supreme Court's decision in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., was widely viewed as a sweeping rebuke of the application of "scheme" liability to secondary actors, the Court's decision also raised some questions regarding the precise scope of secondary actor liability under section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. There is an obvious tension between the Court's holding that the secondary actors in Stoneridge could not be held liable because their "deceptive acts, which were not disclosed to the investing public, [were] too remote to satisfy the element of reliance" and its pronouncement that "[c]onduct itself can be deceptive" and could therefore satisfy a Rule 10b-5 claim. In particular, the question of what type of conduct satisfies the element of reliance in a claim against a secondary actor who assists in the drafting of a company's public disclosures remains open to interpretation.
This Article first discusses the general standards of section 10(b) liability and the Supreme Court's decision in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A. The next part of the Article compares the judicial standards of secondary actor liability under Rule 10b-5(b)—the bright line, substantial participation, and creator standards—that emerged in the post- Central Bank era. It then discusses Stoneridge and the Court's recent rejection of secondary actor "scheme" liability under Rule 10b-5(a) and (c). Finally, it reviews recent applications of Stoneridge and analyzes the implications of these decisions going forward.
Business Lawyers as Enterprise Architects
George W. Dent, Jr., 64(2): 279-328 (February 2009)
What do business lawyers do? To that seemingly simple question there has been no good answer. For twenty-five years the most widely accepted explanation was that offered by Professor Ronald Gilson in his article Value Creation by Business Lawyers: Legal Skills and Asset Pricing in the Yale Law Journal. Examining the work of lawyers in large mergers and acquisitions, Professor Gilson concluded that business lawyers are transaction cost engineers. On that basis, he proposed sweeping changes for the training of business lawyers in law schools.
However, mergers and acquisitions are but one of many tasks handled by business lawyers, and their role in other contexts is quite different. Moreover, the work of business lawyers has changed considerably since 1984. This Article offers a broader and more current analysis of what business lawyers do and concludes that they are more accurately characterized as enterprise architects. The Article then discusses what skills business lawyers need and how law schools can best prepare them for this work.
Revisiting Consolidated Edison—A Second Look at the Case that Has Many Questioning Traditional Assumptions Regarding the Availability of Shareholder Damages in Public Company Mergers
Ryan D. Thomas and Russell E. Stair, 64(2): 329-358 (February 2009)
In October 2005, the U.S. Court of Appeals for the Second Circuit in Consolidated Edison, Inc. v. Northeast Utilities ("Con Ed") ruled that electric utility company Northeast Utilities ("NU") and its shareholders were not entitled to recover the $1.2 billion merger premium as damages after NU's suitor, Consolidated Edison, refused to complete an acquisition of NU. This case surprised many M&A practitioners who believed that the shareholder premium (or at least some measure of shareholder damages) would be recoverable in a suit against a buyer that wrongfully terminated or breached a merger agreement. If Con Ed proves to have established a general rule precluding the recovery of shareholder damages for a buyer's breach of a merger agreement, the potential consequences to targets in merger transactions would be substantial—shifting the balance of leverage in any MAC, renegotiation, or settlement discussions decidedly to the buyer and effectively making every deal an "option" deal. This ruling, therefore, has left some target counsel struggling to find a way to ensure that the merger agreement allows for the possibility of shareholder damages while also avoiding the adverse consequences of giving shareholders individual enforcement rights as express third-party beneficiaries of the agreement.
The Con Ed case, however, merits a second look. This Article revisits the Con Ed decision and challenges the conclusion of some observers that the court in Con Ed established a general precedent denying the availability of shareholder damages. This Article also discusses how the holding of Con Ed may very well be confined to the facts and the specific language of the merger agreement at issue in the case. Notwithstanding, the uncertainty surrounding how any particular court may approach the issues raised in Con Ed, this Article proposes model contract language that a target might employ to avoid creating a " Con Ed issue" and to minimize the risk of a result that was not intended by the parties.
Disclosure Obligations Under the Federal Securities Laws in Government Investigations
David M. Stuart and David A. Wilson, 64(4): 973-998 (August 2009)
With the prevalence of government investigations into corporate conduct, public companies frequently face decisions about whether, when, how, and where to disclose to investors the existence of such investigations and the facts learned in the course of, or as a result of, those investigations. While the federal securities laws (and the rules and regulations promulgated thereunder) require disclosure of specific events that may arise during an investigation, neither those laws nor the courts that have interpreted them provide clear guidance for many of the disclosure decisions that must be made over the course of an investigation. As a result, counsel must carefully analyze numerous facts and circumstances, understand the company's previous disclosures, make "materiality" assessments, and determine whether to make disclosure in a current report or wait until the next periodic filing. This Article seeks to present, through an analysis of precedent disclosures, caselaw, rules, and practical ramifications, the considerations counsel must take into account in evaluating disclosure decisions in the context of an investigation. These considerations can help counsel avoid having a disclosure decision worsen the already difficult circumstances posed by the investigation itself.
Are Corporate Officers Advised About Fiduciary Duties?
Lyman Johnson and Dennis Garvis, 64(4): 1105–1128 (August 2009)
This Article reports the results of an empirical study of whether and how in-house corporate counsel advise corporate officers about fiduciary duties. The fiduciary duties of officers long have been neglected by courts, scholars, and lawyers, even though executives play a central role in corporate success and failure. The study's findings, organized by type of company (public or private), size, and attorney position, show several interesting patterns in advice-giving practices. For example, fewer than half of all respondents provided advice to officers below the senior-most rank. The results raise the possibility that, unlike directors who may overestimate their liability exposure, certain shortcomings in giving advice to officers may cause them to underestimate personal liability exposure and engage in more risky behavior than is desirable for the company itself. The Article also offers recommendations for improved practices in advising officers about their duties.
Report of the Task Force of the ABA Section of Business Law Corporate Governance Committee on Delineation of Governance Roles & Responsibilities
Task Force of the ABA Section of Business Law Corporate Governance Committee on Delineation of Governance Roles & Responsibilities, 65(1): 107–152 (November 2009)
Preemption as Micromanagement
Larry Ribstein, 65(3): 789–798 (May 2010)
The Enforceability and Effectiveness of Typical Shareholders Agreement Provisions
Corporation Law Committee of the Association of the Bar of the City of New York, 65(4): 1153–1204 (August 2010)
One Fundamental Corporate Governance Question We Face: Can Corporations Be Managed for the Long Term Unless Their Powerful Electorates Also Act and Think Long Term?
Leo E. Strine, Jr., 66(1): 1–26 (November 2010)
This essay poses the question of how corporations can be managed to promote long–term growth if their stockholders do not act and think with the long term in mind. To that end, the essay highlights the underlying facts regarding how short a time most stockholders, including institutional investors, hold their shares, the tension between the institutional investors' incentive to think short term and the best interests of not only the corporations in which these investors buy stock, but also with the best interests of the institutional investors' own clients, who are saving to pay for college for their kids and for their own retirement. Although the primary purpose of the essay is to highlight this fundamental and too long ignored tension in current corporate governance, the essay also identifies some modest moves to better align the incentives of institutional investors with those of the people whose money they manage, in an effort to better focus all those with power within the corporation—i.e., the directors, the managers, and the stockholders—on the creation of durable, long–term wealth through the sale of useful products and services.
General Counsel Buffeted by Compliance Demands and Client Pressures May Face Personal Peril
E. Norman Veasey and Christine T. Di Guglielmo,68(1): 57 - 80 (November 2012)
In the "New Reality" of the world of corporate general counsel, the challenges and tensions thrust upon one holding that office have intensified exponentially. Not only does the general counsel uniquely straddle the world of business and law in giving advice to the management and directors of her client (the corporation) but also she may find herself personally in the crosshairs of regulators, prosecutors, and litigants. So, as the rhetoric and real pressures increase to target the general counsel, she must have and use the skills, balance, independence, and courage to be simultaneously the persuasive counselor for her corporate client while being attuned to the need for self-preservation. The lessons from the past targeting of general counsel and other in-house lawyers are ominous. But the quintessential general counsel, acting as both persuasive counselor and a leader in setting the corporation's ethical tone, will do the right thing and thus be prepared to deal with these challenges and tensions.
An Overview of the General Counsel’s Decision Making on Dispute-Resolution Strategies in Complex Business Transactions
E. Norman Veasey and Grover C. Brown; 70(2): 407-436 (Spring 2015)
This Article is an overview of the hard choices that face a general counsel (GC) when weighing the pros and cons of whether and when a particular complex business dispute is better suited for litigation in the public courtroom or through a carefully constructed alternate dispute-resolution (ADR) process, including mediation and/or arbitration. Is either choice inherently more expensive, time consuming, or problematic than the other? The obvious answer is that each of these decisions is fact-intensive, dependent on myriad factors, and neither choice is “inherently” better or worse than the other.
We have focused exclusively on complex commercial disputes between businesses and we analyze the issues that would likely be considered by the GC and other corporate decision makers in choosing and navigating the route that provides the best opportunity for optimal results in resolving a domestic or international business dispute. These dispute resolution choices often must be faced in the negotiation of the terms of a business transaction, and thus before there is a dispute.
We explore the pros and cons of how the panoply of dispute-resolution mechanisms may play out down the road. In doing so, we are mindful of the complicated job of the GC in foreseeing at the negotiation stage how the optimal dispute-resolution process should be analyzed and drafted.
We have learned through our experience, current discussions with GCs, and the abundant literature on the subject that there are divergent views about the efficacy of domestic arbitration, in particular. We believe that the bad anecdotal experiences of some general counsel with arbitration should not pre-ordain a generally negative bias. Nor should good experiences dictate a generally positive bias. Like many questions, the common-sense answer is that “it depends.”
Consequential Damages Redux: An Updated Study of the Ubiquitous and Problematic “Excluded Losses” Provision in Private Company Acquisition Agreements
Glenn D. West; 70(4): 971-1006 (Fall 2015)
An “excluded losses” provision is standard fare as an exception to the scope of indemnification otherwise available for the seller’s breach of representations and warranties in private company acquisition agreements. Sellers’ counsel defend these provisions on the basis of their being “market” and necessary to protect sellers from unreasonable and extraordinary post-closing indemnification claims by buyers. Buyers’ counsel accept such provisions either without much thought or on the basis that the deal dynamics are such that they have little choice but to accept these provisions, notwithstanding serious questions about whether such provisions effectively eviscerate the very benefits of the indemnification (with the negotiated caps and deductibles) otherwise bargained for by buyers. For buyers’ counsel who have given little thought to (or who need better responses to the insistent sellers’ counsel regarding) the potential impact of the exclusion from indemnifiable losses of “consequential” or “special” damages, “diminution in value,” “incidental” damages, “multiples of earnings,” “lost profits,” and the like, this article is intended to update and supplement (from a practitioner’s perspective) the legal scholarship on these various types of damages in the specific context of the indemnification provisions of private company acquisition agreements.
Discipline Involving Multiple Disciplines—Protecting Innocent Executives in the Age of “Cooperation”
James D. Wing and Andrew L. Oringer; 70(4): 1123-1138 (Fall 2015)
In 2008–2009, the global financial system had a near-death experience, and the legal consequences still reverberate. New business, financial, regulatory, and cybersecurity risks abound. Legal risks have become increasingly criminalized, with investigations and prosecutions today directed at corporate directors and officers individually, as companies under investigation choose to “cooperate” with law enforcement. While this “cooperation revolution” already has significantly affected the practice of white-collar criminal defense, its impact is only beginning to achieve general visibility inside three of the other most-affected areas of legal practice: corporate law, insurance law, and civil litigation. These different and largely separate areas must be coordinated if the protection of directors and officers is to be put on sound footing. This article lays out the issues and suggests ways forward in light of developments in the insurance markets.
The “Long Term” in Corporate Law
J.B. Heaton, 72(2): 353-366 (Spring 2017)
To read influential corporate lawyers, legal academics, and jurists, shareholders are an alarmingly myopic bunch who demand that corporate directors and managers make short-term decisions that sacrifice long-term value. But here is the mystery: there is virtually no evidence that shareholders prefer short-term gains that are smaller than larger (discounted) long-term gains.
This article makes a simple claim: the short term/long term rhetoric in Delaware corporate law masks the real battle, one between a rational desire by clear-sighted shareholders for shareholder value maximization, on the one hand, and a desire by courts and others for corporate longevity— i.e., long-term corporate survival—on the other. Corporate law directs, or at least allows, directors to manage for long-term survival under cover of long-term shareholder wealth maximization, i.e., a state of sufficient ongoing profitability that allows the corporation to exist for as long as possible, regardless whether that level of profitability actually is value-maximizing for shareholders.
The problem this raises is obvious: if Delaware allows corporations to prioritize longevity, then that is a goal often at odds with what shareholders want. Whether this policy is good or bad for society, I leave for another day. But so long as Delaware leaves the power of the vote with shareholders while giving directors a hidden power to act against shareholder interests in the name of corporate longevity, we can expect (and will continue to see) shareholder objections and activist efforts in many cases where corporations are worth more in different form, whether differently oriented, smaller, acquired and merged into larger organizations, or, to put it harshly, liquidated and dead altogether.
Human Rights Protections in International Supply Chains - Protecting Workers and Managing Company Risk
David V. Snyder and Susan A. Maslow, 73(4) 1093-1106 (Fall 2018)
Protection of Client Confidential Information from Cyberattacks Is a Compelling Business and Ethical Priority for Inside and Outside Corporate Counsel
E. Norman Veasey; 75(1): 1495-1518 (Winter 2019-2020)
Criminal cyberattacks are increasingly rampant. The criminals who launch these attacks target law firms and businesses mercilessly—around the clock. In-house and external counsel have an urgent responsibility not only to understand the perils that these attacks present to law firms and corporate law departments but also to take defensive action.
Caremark at the Quarter-Century Watershed: Modern-Day Compliance Realities Frame Corporate Directors’ Duty of Good Faith Oversight, Providing New Dynamics for Respecting Chancellor Allen’s 1996 Caremark Landmark
E. Norman Veasey and Randy J. Holland, 76(1): 1-30 (Winter 2020-2021)
Chancellor Allen’s famous and prescient 1996 opinion in Caremark will soon be twenty-five years of age. It has more than stood the test of time. Indeed, it has become gospel as an enduring corporate governance doctrine and a dynamic driver of modern-day oversight and compliance requirements. Although it did not become enshrined as a major Delaware Supreme Court precedent until the Stone v. Ritter Delaware Supreme Court decision in 2006, Chancellor Allen’s 1996 Caremark dictum enjoyed from the outset the international respect of a precedent that had the imprimatur of a Delaware Supreme Court holding.