Delaware and the Transformation of Corporate Governance

101 Pages Posted: 4 Dec 2014 Last revised: 25 Jan 2015

See all articles by Brian R. Cheffins

Brian R. Cheffins

University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: November 27, 2014

Abstract

The corporate governance arrangements of publicly traded companies have been transformed over the past four decades. Various observers have suggested that Delaware, where more than half of U.S. public companies are incorporated, has done much to influence corporate governance changes. This Article considers the nature and extent of Delaware’s contribution to the development of corporate governance, indicating in so doing that this contribution was substantial but not decisive. Delaware had only a marginal impact on changes affecting key corporate governance topics such as executive pay and shareholder activism. On the other hand, with boards a series of well-known Delaware court decisions in the mid-1980s fortified the status of independent directors and provided incentives for boards to be attentive. Also, Delaware court rulings helped to bring to an end the hectic takeover activity of the 1980s, which in turn likely prompted a shift in emphasis away from the market for corporate control in favor of “internal” corporate governance mechanisms.

Keywords: Delaware, corporate governance, boards of directors, takeovers, executive pay, shareholder activism

JEL Classification: G34, G38, K22, N22

Suggested Citation

Cheffins, Brian R., Delaware and the Transformation of Corporate Governance (November 27, 2014). Delaware Journal of Corporate Law (DJCL), Forthcoming; European Corporate Governance Institute (ECGI) - Law Working Paper No. 278/2015; University of Cambridge Faculty of Law Research Paper No. 64/2014. Available at SSRN: https://ssrn.com/abstract=2531640

Brian R. Cheffins (Contact Author)

University of Cambridge - Faculty of Law ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom
+44 1223 330084 (Phone)
+44 1223 330055 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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