Should Corporate Law Go Private?
Delaware’s dominance in corporate law is traditionally attributed to its flexibility, expert judiciary, extensive case law, specialized bar, responsive legislature, and insulation from interest-group lobbying—factors thought to produce a desirable product for firms. This Article challenges the continued viability of that formula, arguing that Delaware faces daunting challenges in maintaining an optimal corporate law regime. We nevertheless show that the state retains an underappreciated secret weapon—the ability of Delaware corporations to opt out of courts and adopt fully privatized law—that can bolster and even strengthen its competitiveness.
We make three contributions in this Article: conceptual, practical, and prescriptive. Conceptually, we show that prevailing jurisdictional competition debates are unhelpfully simplistic as to both demand and supply side features in the market for corporate law. On the demand side, the highly heterogeneous economic, strategic, and financial challenges facing corporate entities make a one-size-fits-all governance model highly improbable. On the supply side, law-producing states must be mindful of this heterogeneity while balancing their own goals and constraints—revenue needs, political capture, interest group pressure, and other frictions. In place of a simplistic account of regulatory competition, we develop and refine a “differentiated product” framework that reflects these demand- and supplyside heterogeneities and delivers concrete insights about the nature of regulatory competition in corporate law.
Our second contribution is a practical application of our conceptual framework: using Delaware’s 2025 amendments as a case study, we demonstrate how interest-group politics shaped the process and outcome in ways inconsistent with the state’s espoused goal of defending its incorporation franchise. Our analysis corroborates empirical evidence indicating that Delaware did not improve its competitive position through the reforms. More importantly, it suggests that in Delaware (as well as other jurisdictions), the veneer insulating corporate law production from broader interest group pressures has worn thin, a state of play that appears unlikely to abate for the foreseeable future.
Nevertheless, our third contribution identifies an escape hatch from this perilous political predicament: private ordering. Other recent Delaware reforms have explicitly empowered shareholders to design governance terms through contract, and even to outsource the adjudication function. We propose a transactional template for leveraging private ordering to deliver stable governance arrangements that could be better insulated from interest group politics, enabling Delaware corporations to remain in state while potentially revitalizing the broader competitive landscape of corporate law.
Corporate Political Speech as Ordinary Business
We have witnessed growing controversy and angst around the propriety of “corporate political speech”—corporate speech on political or social issues. On the one hand, a wide array of customers, consumers, employees, and investors have demanded that corporations make public statements on issues ranging from voting rights to international conflicts premised on the notion that corporations’ outsized influence and impact demand that they speak on critical issues. On the other hand, there has been growing pushback from those who vehemently insist that corporations refrain from corporate political speech because it runs afoul of corporations’ legitimate business goals and fiduciary responsibilities, and is inherently risky, thus inevitably subjecting corporations to considerable controversy and backlash. This polarizing debate has left corporations in a quandary surrounding how best to navigate the corporate political speech terrain.
This Article argues that the current debate surrounding corporate political speech is fundamentally flawed because it is premised on illusory distinctions between corporate political speech and other forms of sanctioned and routine corporate speech, such as advertisements with social messaging or charitable donations supporting controversial causes. By framing corporate political speech as “other”—and thus a form of speech distinct from corporate speech recognized and protected as legitimate business activities— corporations have treated corporate political speech as activity that can be easily defined and compartmentalized. Rather than avoiding risks, such treatment exposes corporations to greater risks by increasing the likelihood that corporations will craft policies that are under-inclusive and ineffective, leaving corporations unaware of ongoing risks associated with their speech activity and thus ill-equipped to respond to risks when they arise. Indeed, corporations have experienced the most severe controversy and backlash from corporate speech activities that corporations did not fully realize would be viewed as corporate political speech. This Article’s fundamental insight is that corporate political speech must be recognized as an indistinguishable component of corporate speech that we view as legitimate business activity. Only by recognizing its place in the broader corporate speech landscape can corporations mitigate ongoing risks related to their speech activity and more appropriately address the full range of issues associated with corporate political speech.
Disrupting Venture Innovation
Venture capital (VC) has funded some of the most valuable innovations of the last half-century—search engines, electric cars, mRNA vaccines. But in recent years, VCs have clustered their investments into a few technology trends—first social media, then crypto, and now AI. The conventional wisdom is that VCs simply pick the most promising pitches they get. On that view, ideas drive funding. In this Article, we argue that funding drives ideas. VCs send signals to the market about which technologies and business models they will fund, and those signals induce entrepreneurs to found startups that suit the VCs’ preferences. The ideas that VCs are willing to fund are not the most socially—or even economically—valuable. Their preferences are shaped by social norms, power law returns, and limited time horizons. The net result is a narrowing of innovation. Drawing from eight years of qualitative research, we develop a model that explains how VCs influence founder behavior. We explain how that influence affects innovation, efficiency, and equity in entrepreneurial ecosystems and consider potential interventions to expand the possibilities for innovation.
Antitrust Law’s Breakup Obsession
Stakeholder-Theory-and-the-Challenge-of-Welfare-Economics
The dominant view of corporate governance, enshrined in Delaware law, is that directors should manage the corporation for the financial benefit of its shareholders. The primary problem for directors implementing this model thus concerns maximizing the present value of the corporation’s shares by trading off present cashflows against future ones. For decades directors have adopted the concepts and methods of financial economics (capital budgeting, discounted cashflow analysis, the CAP-M, etc.) to make such decisions in a rational and disciplined way. The stakeholder model of corporate governance, by contrast, holds that directors should manage the corporation for the benefit of all its stakeholders, including its employees, customers, creditors, suppliers, and the communities in which the corporation operates, and, in an age of climate change, the class of stakeholders may plausibly expand to include all human beings now living or to be born in the future. Virtually always, however, the interests and preferences of individuals in such disparate groups conflict, and so the primary problem for directors implementing the stakeholder model thus concerns balancing these interests and preferences, trading off harms to some in order to capture benefits for others. Assuming that, in making these decisions, directors should be guided by the actual preferences of the individuals involved (and not the directors’ own normative views about what is good for such individuals), the discipline of welfare economics provides concepts and methods that directors could use to make these decisions in a rational and disciplined way. Indeed, without these concepts and methods, the stakeholder model cannot even be coherently formulated. Hence, as financial economics is to the shareholder model of corporate governance, so welfare economics is to the stakeholder model. Thus far, however, advocates of stakeholder theory have done nothing to adopt the concepts and methods of welfare economics. Boards of corporations that purport to follow the stakeholder model do not perform welfarist analyses before making business decisions, and even the academic advocates of stakeholder theory have utterly failed to adopt the concepts and methods of welfare economics to advance their theory beyond commonsense intuitions and notions in order to develop a rigorous account of corporate governance on a par with the shareholder model. In a word, stakeholder theorists have failed to rise to the challenge of welfare economics, and until they do so, the stakeholder theory of corporate governance will not become fully intellectually respectable.