Document Type

Article

Publication Date

1995

Abstract

Professor Dreyfuss adopts what might be termed the more conservative and deferential view of the efficacy of Delaware corporate law in her paper and her presentation. This approach generally views the market as making a statement with which one should not lightly quarrel. Because Delaware continues to attract incorporations, this view posits that the state's attraction is the superiority of its corporate law compared to other states, which lack a semi-specialized Chancery Court. Consequently, in a race to the top of corporate standards, legal rules and adjudications, Delaware's success in the market suggests that Delaware's legal product is good.

Other respected commentators, however, view corporate law standards as a “race to the bottom” in which states scramble over one another to impose the fewest obligations upon corporate management in an attempt to keep and attract incorporations that will bring valued tax revenue to the jurisdiction.

At one point near the end of her paper Dreyfuss acknowledges these conflicting views. Within a few lines, however, she implies that the reader need not worry about the naysayers and should accept the “race to the top” construct. For example, Dreyfuss cites Judge Ralph Winter, Judge Frank Easterbrook, and Professor Daniel Fishel for the proposition that the market indeed forces managers to prioritize shareholders' best interests, even to the point of lobbying the Delaware legislature aggressively on their behalf. Although this trio of prominent legal thinkers may be right, invoking their names as conclusive proof sounds a bit like citing Ronald Reagan, Dan Quayle and Phil Gramm for the proposition that any type of national health care initiative is doomed to failure.

It appears to me that this issue continues to be a debate rather than a settled question. Perhaps I have been too long in the academy, where the intellectual rage is philosophical pragmatism, skepticism, and the contingency of knowledge, (a fad sufficiently powerful that it has enraptured even prominent conservatives such as Seventh Circuit Judge Richard Posner). Nonetheless, I have the uneasy feeling that it is too early in the day to deem the debate ended and declare the race-to-the-top school the clear, final and inevitable winner.

Publication Citation

61 Brook. L. Rev. 67 (1995).