11 Pages Posted: 6 Mar 2008
Date Written: 1989
In a Yale Law Journal article Jonathan R. Macey and Geoffrey P. Miller argue that Smith v. Van Gorkom, commonly referred to as the Trans Union case, should be considered as a takeover case rather than as a Business Judgment Rule Case. As it is currently construed, Smith is broadly applicable as a corporate duty of care case based on the common sense supposition that boards of directors must obtain all reasonably available information before making decisions. Thus, while Macey and Miller claim that their articulated position will result in more easily squaring Smith with other Delaware case law, their position is a radical departure from the views of other commentators. This article argues that none of the reasoning behind the arguments presented by Macey and Miller makes sense. The consequences of overruling Smith are astounding: investor confidence would decrease; market economics would be less efficient; the corporate law doctrine would be less rational; and there would be a loss of corporate accountability. As a result, this article takes the position directly contrary to that of Macey and Miller; Smith v. Gorkom should be reaffirmed not reconsidered.
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