The Professorial Bear Hug: The ESB Proposal as a Conscious Effort to Make the Delaware Courts Confront the Basic 'Just Say No' Question
21 Pages Posted: 20 Nov 2014
Date Written: 2002
In this essay, Vice Chancellor Strine responds to “The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence, and Policy,” an article by Professors Bebchuk, Coates, and Subramanian, and highlights the basic policy choice that the authors ask the Delaware courts to enshrine in the common law of corporations. The question the authors ask Delaware courts to answer is fundamental: Can control of the corporation be sold over the objections of a disinterested board that believes in good faith that the sale is inadvisable? That is, at bottom, the authors want to force the hand of the Delaware courts to decide, once and for all, that impartial and well-intentioned directors do not have the fiduciary authority to “just say no” for an indefinite -- even perpetual -- period to a noncoercive tender offer made to their company's shareholders. Essentially, the authors seek a clear ruling about the proper allocation of power between stockholders and directors in responding to tender offers, and have made it more difficult for the courts to avoid giving an answer. Although “muddling through” has benefits that arguably exceed those that could be achieved by a bright-line rule, nonetheless, the authors have exposed some of the more obvious logical vulnerabilities that now exist in a common law of takeover defense that has, to date, not forthrightly confronted the bottom-line Just Say No question.
Keywords: Law and economics, mergers and acquisitions, M&A, Delaware corporation law, corporate governance, effective staggered board
JEL Classification: G34, K22
Suggested Citation: Suggested Citation