Choice and Federal Intervention in Corporate Law

30 Pages Posted: 28 Aug 2001

See all articles by Stephen J. Choi

Stephen J. Choi

New York University School of Law

Andrew T. Guzman

USC Gould School of Law


In a recent and provocative essay, Lucian Bebchuk and Allen Ferrell put forward a proposal for takeover-related corporate law that they contend 'dominates' the present system of state competition. They advocate in favor of a new federal takeover regime combined with a mandatory choice rule through which shareholders may force a corporation to opt into the new federal regime. We applaud Bebchuk and Ferrell's proposal in so far it expands the amount of choice available to corporations and thereby increases competition within the market for takeover-related legal rules. While some choice makes the present system better, we argue that greater choice, perhaps even in the form of privately-supplied corporate law rules, can further improve overall shareholder welfare. We are also skeptical that simply adding one additional option, albeit at the federal level, will generate significantly more choice for corporations and shareholders. Finally, we disagree with the mandatory choice rule for shareholders on the grounds that shareholders as a group may not always benefit from such a regime.

Keywords: corporate governance, regulatory competition, corporate law, takeovers

JEL Classification: K200, K220, K290

Suggested Citation

Choi, Stephen J. and Guzman, Andrew T., Choice and Federal Intervention in Corporate Law. As published in Virginia Law Review, Vol. 87, pp. 961-992, September 2001, Available at SSRN:

Stephen J. Choi (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States


Andrew T. Guzman

USC Gould School of Law ( email )

699 Exposition Boulevard
Los Angeles, CA 90089
United States

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