Corporation and Contract

Posted: 29 Feb 2008

See all articles by Henry Hansmann

Henry Hansmann

Yale University - Law School; European Corporate Governance Institute (ECGI)

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Date Written: 2006

Abstract

Publicly traded corporations rarely use the nearly absolute freedom afforded them to draft charters that deviate from the default terms of state corporation law. Conventional explanations for this phenomenon are unconvincing. A more promising explanation lies in the lack of any feasible amendment mechanism that will assure efficient adaptation of charter terms as changing circumstances dictate during the long expected lifetime of a public corporation. In effect, by adopting state law default terms, corporations delegate to the state the process of amending charter provisions over time.

Suggested Citation

Hansmann, Henry, Corporation and Contract ( 2006). American Law and Economics Review, Vol. 8, Issue 1, pp. 1-19, 2006, Available at SSRN: https://ssrn.com/abstract=1095570 or http://dx.doi.org/10.1093/aler/ahj007

Henry Hansmann (Contact Author)

Yale University - Law School ( email )

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