Measuring the Influence of the Ali's Principles of Corporate Governance on Coroorate Law

Abstract

The American Law Institute’s Principles of Corporate Governance stands as the most controversial and labor-intensive effort in the history of corporate law. This article investigates the influence the Principles have had on U.S. corporate law by collecting and analyzing the ways courts have cited the Principles. The citation data suggest that the Principles’ influence on corporate law has been uneven. Courts cite only a few sections of the Principles, the controversial provisions do not appear to be cited more often or more favorably than more traditional restatement-style provisions, and citations to the Principles have declined over time.

I argue that this mixed pattern of influence represents an attractive model for transforming corporate reform movements into corporate law. The Principles supplied off-the-shelf legal rules on contentious issues of corporate governance, giving voice to those who called for reform. At the same time, the work was advisory, having no force of its own and relying on courts and legislatures for its implementation. In this way, the Principles preserved and even reinforced the virtues of our state-based system of corporate law. Compared to the recent paradigm of corporate reform – federal legislation that mandates a set of generic reforms for all public companies – there is something appealing about optional, enabling character of the Principles.