Federalism vs. Federalization: Preserving the Division of Responsibility in Corporation Law

63 Pages Posted: 28 Jan 2006  

E. Norman Veasey

Supreme Court of Delaware

Shawn Pompian

Independent Author

Christine Di Guglielmo

Weil Gotshal & Manges LLP

Date Written: December 15, 2005

Abstract

An efficient division of responsibility, and the specialization that necessarily accompanies it, lie at the heart of any successful business enterprise. The same principle applies with equal force to the institutions charged with regulating those enterprises or adjudicating their conduct. Since the enactment of the Securities Exchange Act of 1934 (the 1934 Act), the prevailing division of responsibility in the United States has broadly followed a federal model: The federal government has limited itself (with important exceptions) to disclosure issues in regulating the flow of information from public corporations to the securities markets, while the states have established the legal framework governing the firms' internal affairs. There is also a third, ambiguous area that some describe as the regulation of voting "procedure." That is a term that has some surface legitimacy, but there is a concern that it may sometimes be used as a bootstrap argument for increased federalization.

Suggested Citation

Veasey, E. Norman and Pompian, Shawn and Di Guglielmo, Christine, Federalism vs. Federalization: Preserving the Division of Responsibility in Corporation Law (December 15, 2005). Yale Law & Economics Research Paper No. 324. Available at SSRN: https://ssrn.com/abstract=878246

E. Norman Veasey (Contact Author)

Supreme Court of Delaware ( email )

820 N. French Street
11th Floor
Wilmington, DE 19801
United States
302-577-8425 (Phone)
302-577-3702 (Fax)

Shawn Pompian

Independent Author

No Address Available

Christine Di Guglielmo

Weil Gotshal & Manges LLP ( email )

767 Fifth Avenue
New York, NY 10153
United States

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