Ringling Bros.-Barnum & Bailey Combined Shows v. Ringling: Bad Appointments and Empty-Core Cycling at the Circus

Abstract:     
The Ringling case presents itself as an irrational spat over board seats among spoiled investors. It is not.

The investors were not fighting over board seats; they were fighting instead over corporate offices. Neither were they irrational. Although Edith Ringling pushed her incompetent son and Aubrey Haley her inappropriate husband, they did so to their private advantage. Although the circus cycled from one management team to another, the investors always promoted the new teams for private gain.

The root of the Ringling dispute lay not in irrationality but in the inability of the law to enforce duty-of-loyalty standards. The duty does not just mandate fairness. If enforced, it promotes corporate performance (and the aggregate welfare of all investors) by removing the incentive to appoint less able kin, and the tendency of management teams to cycle. The Ringling circus did not degenerate into the chaos in which it found itself because the investors were spoiled or irrational. It degenerated because the law could not enforce the duty of loyalty.

Working Paper Series