The Social Meaning of Shareholder Suits
Brooklyn Law Review, Vol. 65, No. 1, 1999
Posted: 22 Feb 2000
Corporate law is about norm management. Corporate statutes, the federal securities laws and judicial decisions erect standards for corporations, their officers and directors, and those that control the corporation must comply. Shareholder suits are is, theoretically at least, an important component in the management of corporate norms. Their success in achieving this goal, however, is dependent upon the expressive value of derivative suits and stockholder class actions. The initiation, prosecution and settlement of shareholder suit is more likely to reinforce the norms that are the subject of the suit?s allegations if shareholder suits enjoy a favorable reputation. This article examines the social meaning of shareholder suits; more particularly, the article evaluates the impact of certain procedural and substantive rules that govern shareholder suits. This examination is undertaken from the perspective of how its expressive value is impacted by the ambiguation of its objective, the tying of its mission to compensation instead of deterrence, the various procedural and substantive inhibitions that accompany shareholder suits, and rituals that attend the suits prosecution and settlement. The points developed in the article were delivered by Professor Cox at the Eighth Annual Abraham L. Pomerantz Lecture at the Brooklyn Law School in April, 1999.
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