Interest Group Analysis of Delaware Law: The Corporate Opportunity Doctrine as Case Study
27 Pages Posted: 9 Jan 2017 Last revised: 22 Feb 2017
Date Written: January 5, 2017
Although the prohibition on taking of organizational opportunities is well established, the standards applied to this problem in corporate law disputes are vague and imprecise. Corporate directors and officers lack clear guidance as to when a business venture may be taken for themselves or must first be offered to the corporation. This article reviews the relevant Delaware case law, focusing on the ambiguities inherent therein. It then offers a proposed alternative regime, providing greater certainty and predictability.
The article then turns the question of why Delaware courts have resisted adopting a more determinate standard, such as the one offered here. It argues that — at least in this context — Delaware judges are concerned neither with maximizing the number of Delaware incorporations or promoting the interests of the Delaware bar. Instead, mandatory indeterminacy with respect to corporate opportunities is driven by the Delaware courts’ self-interest in maximizing their reputation.
Keywords: Corporate Opportunity Doctrine, Fiduciary Duties, Directors, Officers, Interest Groups, Indeterminacy, Judicial Incentives
JEL Classification: K22
Suggested Citation: Suggested Citation