Do We Need a Restatement of the Law of Corporate Governance?

In 1978, the American Law Institute (ALI) authorized a project originally intended to result in a Restatement of corporate law.[1] The drafters intended their project to be a departure from traditional restatements.[2] As they visualized it, the project was to offer “a combination of classic Restatement, forward looking guidelines, and perhaps also model provisions.”[3] Their efforts, however, met with immediate resistance. When Tentative Draft No. 1 was published in 1982, it was widely criticized for failing to restate the law but rather proposing major and dramatic changes in the law.[4]

As the decade-long drafting process continued, … Read more

Why We Should Keep Teaching Dodge v. Ford Motor Co.

The question of corporate purpose has been much in the news of late, triggering renewed attention by legal scholars to corporate social responsibility, ESG, and shareholder value maximization. Many of these scholars have been strongly influenced by the late Lynn Stout’s work on the topic. Ten years ago, Stout published her book, The Shareholder Value Myth, [1] which built on her earlier article, Why We Should Stop Teaching Dodge v. Ford.[2] As the latter title suggests, Stout’s principal doctrinal foil was the Dodge case.[3]

Stout’s focus on Dodge was well chosen, since the case and “its statement … Read more

Don’t Compound the Caremark Mistake by Extending It to ESG Oversight

Since the foundational decision in In re Caremark Intern. Inc. Derivative Litig.,[1] Delaware corporate law has required boards of directors to establish reasonable legal compliance programs. Although Caremark has been applied almost exclusively with respect to law and accounting compliance, the original Caremark decision contemplated applying the oversight duty to the corporation’s “business performance.”[2] Accordingly, Caremark claims plausibly could lie in cases in which the corporation suffered losses, not due to a failure to comply with applicable laws, but rather due to lax risk management.

In fact, several commentators have argued that Caremark liability extends—or, at least, … Read more