What Business Will Look for in Corporate Law in the Twenty-First Century

Abstract

GOLDMAN: Thank you, Craig. Craig has told us about the first hundred years and we'll try to run through the next hundred years. We have a very distinguished panel with us today and let me introduce them to you.

To my immediate right, we have Steven F. Goldstone. Steve is currently chairman and CEO of RJR Nabisco. In another life, Steve was a partner in the prestigious New York firm of Davis, Polk & Wardwell, and during the '80s he had major roles in a number of the nation's largest battles for corporate control. In early 1995, he became the general counsel to RJR Nabisco. He then became the chief executive officer in October of 1995. Steve will offer us his views on the next century from the perspective of both a Wall Street lawyer and a CEO, which is kind of unusual. To my immediate left is Richard Agnich. Dick has been senior vice-president and general counsel of Texas Instruments since 1988. He also served as secretary of the board of directors and has dealt with significant corporate governance issues. Dick is president of the Association of General Counsel and has served on the boards of the United States Committee of the Pacific Basin Economic Council ? that's a tough one ? and the U.S. Korean Business Council. He's also a member of the Advisory Board of the International and Comparative Law Center. Today he would give us some provocative remarks on the necessary prerequisites for survival of global corporations.

Two seats down on my right, Pierre S. duPont, IV, one of our commentators. Pete is the former two-term governor of our state. He also served three terms in the United States House of Representatives. Milton Freeman has correctly lauded Pete as one of the few politicians in this country who has "consistently stuck to principles." Pete now practices law with the prestigious firm of Richards, Layton & Finger in Wilmington. He is also Policy Chairman of the National Center for Policy Analysis.

To my far right, the Honorable Jack B. Jacobs, familiar to us all, Vice-Chancellor of the Court of Chancery of the state of Delaware. Jack and I began our careers as law clerks to the Court of Chancery in 1967 ? a few weeks ago ? working for the Honorable William Duffy who then presided as Chancellor. Jack then practiced with the prestigious Wilmington firm of Young, Conaway, Stargatt & Taylor. In 1985, I believe, he became Vice-Chancellor and during the takeover years, he wrote some of the most significant decisions of that time ? some of which I won, some of which I lost ? Ivanhoe v. Newmont,1 QVC v. Paramount.2 He frequently speaks, as we know, at functions for the American Bar Association, the Delaware Bar Association and for Tulane University at its corporate law institute which many of you here have attended.

All right. By way of introduction, in 1996, this little dinky brewing company, Spring Street Brewing Company, became the first entity to have a direct public offering on the internet. It was a very inexpensive situation. In 1999, as we know, technology stocks helped the Dow pass 11,000. This is also the year of the Euro dollar uniting fifteen European currencies. Richard Grasso, chairman of the New York Stock Exchange, has recently acknowledged that the exchange must plan to directly trade foreign stocks, no more DRs, in order to keep pace with the global economy. So where are we going with all this? Eileen Filliben of my office and myself, mostly Eileen, have prepared a piece that is part of your symposium materials entitled "Corporate Governance, Current Trends and Likely Developments for the 21st Century." It's our crystal ball look a hundred years out. So who can tell that we're wrong? We surveyed the current trends in corporate governance and theorize on the likely impact of those trends.

First, technology is reshaping the way companies raise capital, interact with suppliers and relate to investors. Small companies are now raising public capital with direct offerings on the internet.

Now, as we said the first one was in '96. There were 35 in '97 and over 250 in '98. Electronic commerce is exploding. If you've gone on Ebay, whatever, $7 billion over the internet in 1999 in goods traded. $327 billion projected for 2020. Companies are now using the internet for annual reports and proxies. So you've got a technology explosion. Second, you've got globalization. The world is shrinking. Country boundaries are being replaced by boundaries of groups of people who are distinguished by their buying preferences. Nationalism is giving way to interdependence and economic efficiencies. The EMU, European Monetary Union, is being used to unite the currencies of the European nations. The Euro dollar is expected to compete directly with the yen and the American dollar. And in addition to all this, there is a push for a European company statute to allow companies from different member states to merge.

The third prong to this is corporate promoters are rejecting traditional corporate forms today in favor of those providing for maximum potential private ordering. Promoters of these new entities, the limited partnership and the limited liability company, are writing fiduciary duties out of their agreements and the Delaware Court of Chancery is enforcing those agreements.

Among other things, Eileen and I have predicted the following: That corporate promoters worldwide will seek a new form of entity that will afford maximum flexibility and simplicity. The uniform entity will expand the LLC concept and will further meet promoters' needs. Private ordering will replace statutory requisites and common law duties. As the late Judge Henry Friendly of New York once observed, "The business of business is business." It's not fiduciary duties and it's not regulation. Unit holders will be willing to concede almost all control in exchange for higher rates of return. The bucks. The entity contract will structure all stakeholder relationships and define the duties, if any, of the managers. It may eliminate all meetings and elections. Conflicts will be resolved by interpreting the contract. We submit, and this is directed to Delaware, that the jurisdiction that creates, sustains and supports this universal entity will be the corporate governance leader not only in this country but worldwide. It's going to be one economic, one corporate situation. So much for my thoughts and musings. Let's hear what the real experts that you came to hear have to say about the next hundred years.