The Death of Corporate Law

For decades, corporate law played a pivotal role in regulating corporations across the United States. Consequently, Delaware, the leading state of incorporation, and its courts played a central part in corporate law and governance. More than half of publicly traded firms are incorporated in Delaware, and in many law schools in the United States, Delaware corporate law has become virtually synonymous with American corporate law. While some experts have praised Delaware courts for their efficiency and sophistication in adjudicating corporate disputes, and others have accused the Delaware courts of pro-management leanings, very few would dispute that Delaware courts have played … Read more

Principal Costs: A New Theory for Corporate Law and Governance

For the last 40 years, the problem of managerial agency costs—corporate managers shirking duties and diverting resources—has dominated the study of corporate law and governance. Many scholars treat the reduction of agency costs as the essential function of corporate law and governance. To reduce agency costs, these scholars would mandate corporate governance arrangements that empower shareholders to hold managers accountable, such as majority voting and proxy access. And they would ban arrangements that disempower shareholders, such as staggered boards and dual-class shares. Similarly, they support hostile takeovers and hedge fund activism to combat management entrenchment and reduce agency costs. To … Read more