Soft Paternalism for Close Corporations: Helping Shareholders Help Themselves
43 Pages Posted: 6 Aug 2008 Last revised: 14 Dec 2008
Date Written: August 5, 2008
This Article draws on the idea, recently popularized by Richard Thaler and Cass Sunstein, that individuals are imperfect and can sometimes use a well-meaning "nudge" to help them reach decisions that are in their best interest. The Article applies these concepts to the persistent problem of minority shareholder oppression in close corporations and makes soft-paternalistic suggestions to encourage less sophisticated incorporators to protect themselves against squeeze and freeze outs. These include modest changes to states' typically one-page incorporation forms, improvements to do-it-yourself incorporation resources, and additional offerings for online incorporation services. Once implemented, these recommendations will complement existing close corporation law by helping shareholders help themselves guard against oppression and thereby obviate the need to determine after the fact whether the parties bargained for such protections and whether the law affords such a remedy.
Keywords: corporations, close corporations, behavioral law and economics, soft paternalism
JEL Classification: K22
Suggested Citation: Suggested Citation