Is Corporate Law Trivial?: A Political and Economic Analysis

56 Pages Posted: 11 Sep 2002


On its face, state corporate law contains a mix of mandatory and default rules. I develop the "triviality hypothesis" that the appearance of a mandatory core to state corporate law is a mirage, and that state corporate law is trivial, in the sense that it lets companies -- managers and investors together -- establish any set of governance rules they would reasonably want. Rules that appear mandatory may be trivial for four reasons. First, some mandatory rules would be universally adopted if people thought about them ("market mimicking" rules). Second, some rules can be avoided by advance planning, including choice of capital structure and state of incorporation. Third, some mandatory rules are unimportant -- they cover situations that occur rarely or matter little. Finally, as circumstances change, some rules that used to be market mimicking, avoidable, or unimportant may matter, but precisely because these rules matter, they will soon be changed. The political forces that led to the trivialization of corporate law will see to that. Many apparently mandatory corporate law rules are trivial in one of these senses. Moreover, proving that nontrivial rules exist is hard. It is not trivial to disprove the extreme null hypothesis that all of state corporate law is trivial.

Suggested Citation

Black, Bernard S., Is Corporate Law Trivial?: A Political and Economic Analysis. As published in Northwestern University Law Review, Vol. 84, pp. 542-597, 1990. Available at SSRN: or

Bernard S. Black (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-2784 (Phone)

Northwestern University - Kellogg School of Management

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)

European Corporate Governance Institute (ECGI)


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