As a follow-up to my posts from yesterday, this is my last post from the two-day seminar at the Tulane Corporate Law Institute. One of the benefits for the 250 attendees at this New Orleans venue, is the further clarification and direction for corporate practitioners provided by members of the Delaware Chancery Court and Delaware Supreme Court who are on the panels at this seminar along with other leading lawyers from around the country who labor in the vineyards of Delaware corporate governance. Remember that these comments by members of the judiciary are "off the record" and do not represent the official position of the courts on which they sit, but nevertheless for those who need to understand the formal opinions of these courts, such commentary is akin to manna from heaven.
One other "added value" of the seminar is the intangible positive impact from the interaction "on a personal level, without discussing cases" of the members of the judiciary who attend, with the lawyers from around the country who often appear before the Delaware courts. Some of the "Delaware-bashing" commentators who criticize judges who participate in scholarly colloquia or write and participate in the development of the law outside of their judicial opinions, miss at least one point. There is a demonstrable increase in professionalism and efficiency when lawyers and judges gather outside the courtroom on a personal level and get to know each other on a collegial basis. This interaction, on a human level, makes it easier and more enjoyable to work with people, even if they are lawyers on opposite sides of a case.
Former Chancellor William Allen, who is now a professor at New York University Law School and also on the faculty of their Stern School of Business, was on a panel this morning and gave his perspective of Delaware corporate law about 20 years ago, prior to 1985. At that time, former Chancellor Allen explained, things were much simpler and there were two basic principles that governed the analysis of director conduct, for example, in the context of mergers and acquisitions. The two basic governing principles were: (i) the fiduciary duty concept that any self dealing by directors or controlling shareholders would be subject to a much higher level of scrutiny and a shifting of the burden of proof; and (ii) the Business Judgment Rule that provides that the court will not second-guess a board’s decision if the circumstances justify the presumption that their decision was made on an informed basis, in good faith and in the best interests of the company. Then, if 1985, came the decisions in Van Gorkom, Unocal and Revlon, which heralded a much more nuanced and multi-layered range of standards to review directors’ actions.
Chief Justice Myron Steele of the Delaware Supreme Court was also on a panel this morning and his "off the record" remarks were also illuminating. He reminded those gathered that for purposes of corporate governance (as compared with LLCs, for example), there are three bedrock principles that are fundamental: (i) the Delaware General Corporation Law which provides at Section 141(e) that the directors manage the corporation; (ii) the shareholder franchise is sacrosanct (my word) and will be vigorously protected; and (iii) all cases are factually-based, and the facts cannot be separated from the decision of the courts. He also remarked that practitioners found it helpful when the members of the judiciary present at seminars and shed light on less clear areas of the law–for the benefit of lawyers–and other judges– who need to know what that law is so that they can advise their clients on what the law is and what standards judges will use to decide issues presented to them. Another panel discussed MAC clauses, and one of the members of the Chancery Court suggested that in the current environment it was likely that there would be more "deal certainty" which of course will impact the price of the particular deal.