and Delaware Corporation Law
Posted by Lawrence A. Hamermesh,
University of Pennsylvania, and Leo E. Strine, Jr., Delaware Supreme
Court, Harvard Law School, and Aspen Institute, on Thursday, October
Chapter, forthcoming in the Oxford Handbook of Fiduciary Law,
examines the principles that animate Delaware’s regulation of corporate
fiduciaries. Distilled to their core, these principles are to: give fiduciaries
the authority to be creative, take chances, and make mistakes so long as their
interests are aligned with those who elect them; but, when there is a suspicion
that there might be a conflict of interest, use a variety of accountability
tools that draw on our traditions of republican democracy and equity to ensure
that the stockholder electorate is protected from unfair exploitation.
reviewing the evolution and institutional setting of the pertinent
Delaware case law, the Chapter details how these principles have
emerged in several highly-salient contexts (the business judgment
rule, controller freeze-outs, takeovers, and stockholder elections),
and demonstrates that the identified principles aim to preserve the
benefits of profit-increasing activities in a complex business world
where purity is by necessity impossible. Further, the Chapter
demonstrates that, even when a stricter approach to fiduciary
regulation is warranted because of the potential for abuse, these
principles hew to our nation’s republican origins and commitment to
freedom in another way: when possible to do so, regulation of
fiduciary behavior that might involve a conflict of interest should
not involve after-the-fact governmental review, but before-the-fact
oversight by the fiduciaries of the corporation who are impartial and,
most importantly, by the disinterested stockholders themselves.
Chapter is available for download here.
Harvard Law School Forum
on Corporate Governance and Financial Regulation
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