Farewell to Fairness: Towards Retiring Delaware's Entire Fairness Review
65 Pages Posted: 12 Feb 2019 Last revised: 17 Mar 2019
Date Written: February 8, 2019
This Essay entertains the idea that Delaware’s corporate law is set on a trajectory that would eventually lead to reforming its doctrine of entire fairness as we now know it by retiring the doctrine’s substantive fairness review prong and insisting on fully-informed consent as the only way for validating tainted transactions. A growing array of cases, in which the centerpiece is Kahn v. M&F Worldwide Corp. (MFW), creates a legal sphere within which traditional entire fairness analysis has no application. Within this sphere, things rise or fall depending solely on the existence or absence of an uncoerced fully-informed ratification, in line with fundamental principles of fiduciary law in Delaware and in other common law jurisdictions. The critical move, which may take time to materialize, will take place when the courts deal the traditional doctrine the coup de grâce and abolish substantive fairness review entirely, if one may say so. Treating this development as highly desirable in principle, this Essay discusses practical and normative issues that call for attention in order to ensure its successful functionality, including the use of technology to ensure the integrity of informed consent through shareholder voting and the rise of institutional cross ownership, which may call for special attention in MFW-relevant settings.
Keywords: corporate governance, entire fairness, fiduciary duties
JEL Classification: K22
Suggested Citation: Suggested Citation