Abstract

http://ssrn.com/abstract=249067
 
 

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Sales and Elections as Methods for Transferring Corporate Control


Ronald J. Gilson


Stanford Law School; Columbia Law School; European Corporate Governance Institute (ECGI)

Alan Schwartz


Yale Law School

November 2000

Stanford Law and Economics Olin Working Paper No. 206; Columbia Law and Economics Working Paper No. 180; Yale Law & Economics Research Paper No. 244

Abstract:     
Under standard accounts of corporate governance, capital markets play a significant role in monitoring management performance and, where appropriate, replacing management whose performance does not measure up. Recent case law in Delaware, however, appears to have altered dramatically the mechanisms through which the market for corporate control must operate. In particular, the interaction of the poison pill and the Delaware Supreme Court's development of the legal standard governing defensive tactics in response to tender offers have resulted in a decided, but as yet unexplained, preference for control changes mediated by means of an election rather than by a market. In this paper, we begin the evaluation of the preference for elections over markets that the Delaware Supreme Court has not yet attempted. We apply to this effort both doctrinal logic and insights derived from an interesting but complex formal literature that has developed to understand how voting structures work in political contests and jury deliberations. Since these contexts differ substantially from transfers of corporate control, our analysis raises a question of fit: are voting models suitable for analyzing the question asked here? In our view, the models do shed some light on the takeover institution, but if this view is ultimately rejected, then we will have eliminated what at least superficially appears to be a useful set of tools.

Number of Pages in PDF File: 43

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Date posted: April 13, 2001  

Suggested Citation

Gilson, Ronald J. and Schwartz, Alan, Sales and Elections as Methods for Transferring Corporate Control (November 2000). Stanford Law and Economics Olin Working Paper No. 206; Columbia Law and Economics Working Paper No. 180; Yale Law & Economics Research Paper No. 244. Available at SSRN: http://ssrn.com/abstract=249067 or http://dx.doi.org/10.2139/ssrn.249067

Contact Information

Ronald J. Gilson (Contact Author)
Stanford Law School ( email )
559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-723-0614 (Phone)
650-725-0253 (Fax)
Columbia Law School ( email )
435 West 116th Street
New York, NY 10025
United States
212-854-1655 (Phone)
212-854-7946 (Fax)
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Alan Schwartz
Yale Law School ( email )
P.O. Box 208215
New Haven, CT 06520-8215
United States
203-432-4030 (Phone)
203-432-8260 (Fax)
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