Delaware's Corporate-Law System: Is Corporate America Buying an Exquisite Jewel or a Diamond in the Rough? A Response to Kahan & Kamar's Price Discrimination in the Market for Corporate Law
26 Pages Posted: 24 Nov 2014
Date Written: 2001
In this response to Professors Marcel Kahan and Ehud Kamar's article titled Price Discrimination in the Market for Corporate Law, Vice Chancellor Strine addresses Professors Kahan and Kamar's contention that Delaware's system of corporate law inefficiently subjects corporations to excessive uncertainty and litigation costs.
Vice Chancellor Strine makes four fundamental points. First, he notes that while Professors Kahan and Kamar criticize Delaware's current approach as indeterminate, they fail to embrace or flesh out a comprehensive alternative. Second, he points out a contradiction in Kahan and Kamar's argument: under their view, the practical operation of Delaware's corporate law is both a benefit to and a drain on social welfare. Third, he suggests that there are two factors -- divided constituent input and human fallibility -- that better explain the apparent indeterminacy in Delaware corporate law. Finally, Vice Chancellor Strine questions whether Delaware law is overly uncertain or inefficient. He concludes that much of the uncertainty of Delaware's corporate law unavoidably flows from that law's flexibility, which allows economically useful managerial freedom subject to limited judicial intervention to ensure good-faith compliance with fiduciary duties.
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