Lipton and Rowe's Apologia for Delaware: A Short Reply

22 Pages Posted: 13 Feb 2002

See all articles by Ronald J. Gilson

Ronald J. Gilson

Stanford Law School; Columbia Law School; European Corporate Governance Institute (ECGI); Stanford Law School

Multiple version iconThere are 2 versions of this paper

Date Written: December 2001


In Unocal Fifteen Years Later I offered a respectful but negative assessment of the Delaware Supreme Court's post-Unocal efforts to walk a line between managerialists who believe directors should be able to block a hostile takeover, and those who believe the ultimate decision whether to accept a takeover bid belongs to the shareholders. I suggested that Delaware law could be repositioned without requiring the Delaware Supreme Court to confess error by allowing shareholder adopted bylaws that repeal or amend poison pills. Martin Lipton and Paul Rowe responded to my essay by arguing that recent economic challenges to efficient market theory, together with studies showing that the poison pill leads to increased takeover premia, undermines the premise on which a shareholder choice regime is based. In this reply, I correct Lipton and Rowe's misunderstanding of the role of market efficiency (and recent critical studies) in assessing shareholders' role in the governance of takeovers, as well as their assessment of why a poison pill may increase takeover premia.

Suggested Citation

Gilson, Ronald J., Lipton and Rowe's Apologia for Delaware: A Short Reply (December 2001). Available at SSRN: or

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