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

See all articles by Leo E. Strine Jr.

Leo E. Strine Jr.

Harvard Law School; University of Pennsylvania Law School

Date Written: 2001

Abstract

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.

Suggested Citation

Strine Jr., Leo E., 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 (2001). Cornell Law Review, Vol. 86, P. 1257, 2001. Available at SSRN: https://ssrn.com/abstract=2530090

Leo E. Strine Jr. (Contact Author)

Harvard Law School ( email )

1563 Massachusetts Ave
Cambridge, MA 02138
United States

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States

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