The Challenge of Holding Big Business Accountable

Is big business ungovernable? Some of today’s calls to break up and intensely regulate big business do not hinge on harms to consumers as consumers, but rather on the claim that giant corporations with market power treat legal requirements as mere recommendations, and routinely engage in behavior that harms others as long as it maximizes their own bottom line. Importantly, the big-is-ungovernable claim has by now firmly entered policy circles. To illustrate, in 2020, a congressional subcommittee investigating the conduct of big tech platforms maintained that Google, Amazon, Facebook, and Apple leverage their power to shape the regulatory framework that … Read more

Mission Critical ESG and the Scope of Director Oversight Duties

How can shareholders hold directors accountable for paying insufficient attention to the broader interests of society? In the past few years, several ESG issues have become a source of major risk for companies and their shareholders. Even if the behavior in question is not punishable by law, failure to address critical ESG concerns could harm a company’s reputation and ability to attract and retain talent, access capital, or sell products. The ESG literature has mostly focused on classic corporate governance mechanisms for shareholders to hold directors accountable, from voting with their feet by investing based on ESG criteria to voting … Read more

Max Oversight Duties: How Boeing Signifies a Shift in Corporate Law

In September 2021, the Boeing 737 Max debacle turned into an important moment in corporate law. A Delaware court allowed a derivative lawsuit brought by Boeing shareholders to proceed, based on the theory that Boeing’s directors breached their oversight duties by not doing enough to monitor, prevent, and react to fatal airplane safety issues. In a new essay, I explore what the Boeing decision means for director oversight duties and use it to discuss broader trends in corporate law.

Boeing signifies and puts an exclamation mark on a new era of heightened oversight duties (dubbed Caremark duties, after Delaware’s … Read more

How “Books and Records” Rewrote the Rulebook

One of the most important developments in Delaware corporate law recently has been the expansion of shareholder rights to company information. Shareholders can now use their general right to inspect a company’s “books and records” (Section 220 of the Delaware General Corporation Law) to obtain internal communications among directors and between them and their third-party advisers, including occasionally private emails or LinkedIn messages. Shareholders can then use the internal documents to show disclosure deficiencies and conflicts of interests, thereby overcoming what once seemed insuperable hurdles to pleading in litigation. Section 220 has thus turned into a powerful shareholder protection tool, … Read more

Reputation Through Litigation

“Reputation matters” is by now almost a mantra. Scholars of commercial law increasingly refer to reputational concerns as important forces that shape our behavior – a “system of control” of sorts. The idea – backed by mounting empirical evidence – is that news about corporate misbehavior should bring with it declines in stock prices, in consumers’ willingness to pay, and in employee motivation. Companies and business people anticipate the risk of diminished future business opportunities, and it encourages them to avoid misbehaving, the argument goes. Yet so far the literature has stayed remarkably silent on how exactly reputation matters, or … Read more

A Reputational Theory of Corporate Law

How does corporate law matter? My recent paper suggests that the main impact of corporate law is not in imposing sanctions, but rather in producing information. The process of litigation or regulatory investigations produces information on the behavior of defendant companies and businessmen. This information reaches third parties, and affects the way that outside observers treat the parties to the dispute. In other words, corporate and securities litigation affects behavior indirectly, through shaping the reputations of companies and businessmen.

The paper explores how exactly information from the courtroom translates into the court of public opinion. By analyzing the content of … Read more