Painting the Corporate Cathedral: The Protection of Entitlements in Corporate Law

Abstract

Policy-based corporate law scholarship has come to be dominated by law and economics contractarian theory. Contractual focuses have obscured three deficiencies of the theory: inadequate attention to post-contractual bargaining, reductionist approaches to legal rights, and indifference to distributional considerations. Calabresi and Melamed's framework for examining the allocation and protection of legal entitlements, as explored and refined over more than 25 years of scholarship, offers a systematic means of analysing these neglected areas without compromising an economic orientation. The author uses this analytical tool to demonstrate that, under conditions of relatively low bargaining costs, traditional strict fiduciary doctrine achieved bargaining outcomes that are likely to be both efficient and equitable. It accomplished this by relying simultaneously on property rule protection and information-forcing properties.