Professor Christopher M. Bruner, Associate Professor of Law and Ethan Allen Faculty Fellow, recently published his article, Managing Corporate Federalism: The Least-Bad Approach to the Shareholder Bylaw Debate, 36 Del. J. Corp. L. 1 (2011) in Widner Law’s Delaware Journal of Corporate Law.
In the article, Professor Bruner discusses the usage and impact of corporate bylaws to augment shareholder power and limit board influence. He examines the contested nature of bylaws, the fundamental issues of corporate power and purpose that they implicate, and the differing ways in which state and federal lawmakers and regulators may impact the debate regarding the scope of the shareholders’ bylaw authority.
The paper first discusses various dimensions of corporate governance historically addressed in the bylaws, and the controversial uses to which bylaws have been put by shareholders seeking greater corporate governance power, focusing on Delaware – the jurisdiction of incorporation for most public companies. Prof. Bruner then turns to the ways in which rules of corporate governance are generated in our federal legal system, including the complex and evolving mechanisms through which state and federal lawmakers and regulators interact. He concludes that this process threatens to distort substantially the evaluation and evolution of the shareholders’ bylaw authority by presenting the Delaware Supreme Court with proposed bylaws to be assessed in the abstract – an awkward posture resulting in the sacrifice of important values reflected in the ripeness doctrine, and abandonment of the presumption of validity that ordinarily favors enacted bylaws.
Prof. Bruner then considers who ought to determine the scope of permissible shareholder bylaws, concluding that there is no perfect approach because no one of the relevant state or federal actors dominates with respect to both political legitimacy and relevant expertise – the SEC possessing neither, while Congress possesses the former and Delaware the latter. He argues, however, that the least-bad approach would be to remove the SEC from the process entirely, leaving these matters to Delaware in the first instance, subject to future intervention by Congress. This approach, he argues, would eliminate the distortion introduced by SEC certification of bylaw disputes directly to the Delaware Supreme Court, permitting resolution of the fundamental issues at stake in a more organic and better informed manner through traditional Delaware litigation.
Congratulations to Prof. Bruner on the publication of this article.