Vol. 73 No. 2 -- Spring 2018

  April 2018

Articles

Business & Corporate

The Demand Review Committee: How It Works, and How It Could Work Better

73(2): 305-318 (Spring 2018) Stockholders must ordinarily make a demand on their board of directorsbefore initiating litigation on the corporation’s behalf. But the litigationconsequences of a stockholder demand—a binding concessionof the board’s ability to impartially consider a demand—are so harshin the ensuing litigation that stockholders rarely choose that path. Thedemand requirement is thus falling short of its promise as an internaldispute resolution mechanism. If, as we suggest, stockholders typicallyavoid making a demand and instead prefer to initiate litigation and raisedemand futility arguments, no matter how weak, they deprive independentboards of the opportunity to consider the merits of potential litigationoutside the courtroom. We propose a private-ordering solution,in which stockholders and boards can agree, if they choose, to reserverights on demand futility arguments while a demand review process isundertaken. This would allow boards to engage with stockholders in thereview process, and would replace some demand futility litigation withboardroom deliberation, thereby restoring the internal dispute resolutionfunction to the demand requirement.

Business & Corporate

Distributed Stock Ledgers and Delaware Law

73(2): 319-336 (Spring 2018) Effective August 1, 2017, the Delaware General Corporation Law (the“DGCL”) now authorizes Delaware corporations to use blockchain technologyto maintain stock ledgers and communicate with stockholders.Consistent with the DGCL’s status as an enabling act that facilitates privateordering, the blockchain amendments are permissive. In the nearterm, they create a foundation for a technology ecosystem by removingany uncertainty about the validity of shares that have been issued or aremaintained using blockchain technology. Over a longer time horizon,the amendments foreshadow a more flexible, dynamic, and digital futurein which distributed ledger technology and smart contracts play majorroles.

Business & Corporate

In Defense of E. Merrick Dodd: Corporate Social Responsibility in Modern Corporate Law and Investment Strategy

73(2): 337-374 (Spring 2018) This response to E. Merrick Dodd and the Rise and Fall of CorporateStakeholder Theory by Charles Elson and Nicholas Goossen argues thatstakeholder theory has not failed, but rather has been incorporated intostandard business practice through the widely accepted principles of corporatesocial responsibility (“CSR”). Forty years of research demonstratesthat CSR contributes or may even be essential to profitability, whichmay explain why investments in ESG funds have grown dramaticallyin recent years, even among institutional investors. This response alsoexamines many of the legal and economic theories that Elson and Goossenemploy in their attack on stakeholder theory, and argues that theyare, at best, debatable.

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