Interpreting Organizational 'Contracts' and the Private Ordering of Public Company Governance

Abstract

Corporate law is undergoing an explosion of governance by private ordering. With increasing frequency and creativity, the charter and bylaws of public corporations are being used as tools for restructuring key aspects of corporate governance. The current focus of parties, courts, and scholars has been on the facial validity of these efforts. In light of courts’ willingness to uphold corporate governance contracting, legal battles will morph from validity challenges to interpretation disputes. Yet interpretation principles are a topic to which corporate scholars have devoted limited attention. With interpretation poised to take on an influential role in shaping corporate law and norms, establishing a cohesive interpretative framework is critical.

This Article rejects the contract metaphor traditionally applied to questions of charter and bylaw interpretation in favor of a more nuanced interpretative framework. Dissecting the provisions that comprise a public corporation’s organizational documents reveals a rich combination of standardization, customization, and innovation. Drawing from many sides of traditional interpretation debates, this Article links the different types of organizational provisions to the interpretive theory and principles that most accurately achieve the primary interpretive goals attendant to each. The outcome is a framework that requires courts to engage in a more explicit and tailored analysis, resulting in a stable interpretation scheme and clear judicial guidance to market actors.

Keywords: organizational documents, charter, bylaws, corporate governance, private ordering, contract metaphor, contract interpretation, interpretation, statutory interpretation

JEL Classification: k22