In a 2001 article (Function Over Form: A Reassessment of Standards of Review in Delaware Corporation Law) two of us, with important input from the other, argued that in addressing issues like hostile takeovers, assertive institutional investors, leveraged buyouts, and contested ballot questions, the Delaware courts had done exemplary work but on occasion crafted standards of review that unduly encouraged litigation and did not appropriately credit intra-corporate procedures designed to ensure fairness. Function Over Form suggested ways to make those standards more predictable, encourage procedures that better protected stockholders, and discourage meritless litigation, by restoring business judgment rule protection for transactions approved by independent directors, the disinterested stockholders, or both. This article examines how Delaware law responded to the prior article’s recommendations, concluding that the Delaware judiciary has addressed most of them constructively, thereby creating incentives to use procedures that promote the fair treatment of stockholders and discourage meritless litigation. The continued excellence and diligence of the Delaware judiciary is one of Delaware corporate law’s core strengths. But some recent cases have articulated standards of review that involve greater than optimal litigation intensity and less than ideal respect for decision-making in which independent directors and disinterested stockholders have potent say. Those standards also impair the integrity of Delaware’s approach to demand excusal in derivative cases and the identification of controlling stockholders. We also propose eliminating concepts like substantive coercion that do not provide a legitimate basis for resolving cases. Finally, we urge action to correct new problems such as the unfair targeting of corporate officers for negligence claims in representative actions and the frustrating state of practice under Delaware’s books and records statute.

Table of ContentsI. Introduction 909II. Lyman Johnson's Contribution to Doctrinal Sensibility 910A. Rethinking Due Care 914B. The Modest Business Judgment Rule 918C. Remembering Loyalty 920D. Lyman Johnson's Contribution to Delaware Corporate Law Doctrine 922III. Lyman Johnson and the Fiduciary Duties of Corporate Officers 926IV. Lyman Johnson's Contribution to the Proper Focus of Corporate Purpose 929I.IntroductionProfessor Lyman Johnson is not the first, nor will he be the last, legal scholar to analyze, conceptualize, and publicize his insights about Delaware corporate law. But, among those who have made invaluable and enduring contributions to that important space, Lyman ranks among the highest, measured by what academics value: influencing the development of Delaware's corporate law. There is solid evidence of that influence, which this article is intended to develop. Along the way, we pay tribute to one of legal academia's finest.This Article proceeds in three Parts, linked together by the concept of prophecy. The first will demonstrate the influence of Lyman Johnson's-we believe prophetic-efforts to maintain the integrity of Delaware corporate law principles.1 Those include the business judgment rule and its fiduciary duties of care and loyalty; and also the proper separation of substantive fiduciary duties and the standards by which observance of those duties should be reviewed.2 The second part identifies Professor Johnson's galvanizing insights into the subject of officer fiduciary duties, and the attention that those insights have engendered.3 The third and final part focuses on Professor Johnson's policy view that, consistent with its wealth-producing objective, corporate law should also serve the welfare of society.4II.Lyman Johnson's Contribution to Doctrinal SensibilityAlthough lawyers, judges, and professors may occupy different positions on the legal spectrum, all would-or should- agree upon the importance of doctrinal clarity and integrity. Without it, lawyers could not advise clients with confidence how best to conform their conduct to the law, judges could not pronounce what the law commands in a way that makes sense to the parties and the public, and academics would be unable to discharge their role of bringing analytical predictability and clarity to the overall endeavor. For business enterprise law in particular, doctrinal coherence is highly consequential5 because of what is so often at stake-multi-billion dollar transactions that have national economic impact.Lyman Johnson's contribution to the clarity and coherence of Delaware corporate law doctrine finds its most eloquent and enduring expression in three articles that he wrote almost two decades ago: Rethinking Judicial Review of Director Care,6 The Modest Business Judgment Rule,1 and After Enron: Remembering Loyalty Discourse in Corporate Law.8 In his first two articles, Professor Johnson persuasively advocated that on two bedrock doctrinal issues, the business judgment standard of review and the fiduciary duty of care, Delaware Supreme Court jurisprudence had gone astray and needed a fundamental course correction.9 In his third article, Professor Johnson raised the question of whether the supposed conceptual distinction between care and loyalty is as clear as widely believed and whether the duty of loyalty should be more formally recognized as having, in addition to its non-betrayal aspect, an affirmative devotion dimension.10 Given the influential impact of these writings, it is useful to retrace their ancestry and the insights that underlie them, which to us resonate as strongly today as they did sixteen years ago.The casus belli was a Delaware Supreme Court decision handed down in 1993: Cede & Co. …

In each of the three largest economies with dispersed ownership of public companies�the United States, the United Kingdom, and Japan�hostile takeovers emerged under a common set of circumstances. Yet the national regulatory responses to these new market developments diverged substantially. In the United States, the Delaware judiciary became the principal source and enforcer of rules on hostile takeovers. These rules give substantial discretion to target company boards in responding to unsolicited bids. In the United Kingdom, by contrast, a private body consisting of market professionals was formed to adopt and enforce the rules on hostile bids and defenses. In contrast to those of the United States, the U.K. rules give the shareholders primary decisionmaking authority in responding to hostile takeover attempts. The hostile takeover regime in Japan, which developed recently and is still evolving, combines substantive rules with elements drawn from both the United States (Delaware) and the United Kingdom, while adding distinctive elements, including an independent enforcement role for Japan�s stock exchange. This Article provides an analytical framework for business law development to explain the diversity in hostile takeover regimes in these three countries. The framework identifies a range of supply and demand dynamics that drives the evolution of business law in response to new market developments. It emphasizes the common role of subordinate lawmakers in filling the vacuum left by legislative inaction, and it highlights the prevalence of �preemptive lawmaking� to avoid legislation that may be contrary to the interests of important corporate governance players. Extrapolating from the analysis of developed economies, the framework also illuminates the current state and plausible future trajectory of hostile takeover regulation in the important emerging markets of China, India, and Brazil. A noteworthy pattern that the analysis reveals is the ostensible adoption�and adaptation�of �best practices� for hostile takeover regulation derived from Delaware and the United Kingdom in ways that protect important interests within each emerging market�s national corporate governance system

In each of the three largest economies with dispersed ownership of public companies - the United States, the United Kingdom, and Japan - hostile takeovers emerged under a common set of circumstances. Yet the national regulatory responses to these new market developments diverged substantially. In the United States, the Delaware judiciary became the principal source and enforcer of rules on hostile takeovers. These rules give substantial discretion to target company boards in responding to unsolicited bids. In the UK, by contrast, a private body consisting of market professionals was formed to adopt and enforce the rules on hostile bids and defenses. In contrast to those of the US, the UK rules give the shareholders primary decision making authority in responding to hostile takeover attempts. The hostile takeover regime in Japan, which developed recently and is still evolving, combines substantive rules with elements drawn from both the US (Delaware) and the UK, while adding distinctive elements, including an independent enforcement role for Japan’s stock exchange.

... The Patriot Act has been widely understood as a" sweeping" antiterrorism law that gave the government" vast new powers" to conduct electronic surveillance over the Internet.... The Internet is a" packet switched" network, which means that every communication sent over the Internet is broken down into individual packets.... In fact, the tool's user interface was designed with the law specifically in mind: the Carnivore software, which runs on a home PC or a laptop, prompts the user to enter in the exact type of traffic that the court order specifies-eg, pen/trap vs. full content, email envelope vs. packet envelope.... The computer trespasser exception concerns prospective content surveillance and allows law enforcement to intercept the contents of Internet communications sent by a" computer trespasser" without a warrant from the computer of a consenting victim of the trespasser.... This problem is matched with an even …

In this commentary, the authors examine the role of Smith v. Van Gorkom as part of a continuum of Delaware judicial decisions that gives insufficient weight to the substantive policy judgments underlying the gross negligence standard of review that governs whether corporate directors should be found liable for breaching their duty of care. The gross negligence standard is consistent with Delaware's long-standing policy of deferring to business decisions made by well-motivated fiduciaries and limits the ability of judges to intervene in business decisions made by properly motivated directors. The authors argue that Van Gorkom and two of its important progeny run counter to Delaware public policies restricting the judicial enforcement of the duty of care to cases where directors have acted in a manner that represents an extreme departure from expected normative behavior, and, if damages are sought, have not been exculpated by the firm's certificate of incorporation. They conclude by proposing that to better align judicial decision-making with those public policies, courts should apply a true gross negligence liability standard, which would require plaintiffs to prove that a director caused quantifiable damage. The authors further propose that courts respect decisions by stockholders that insulate directors from liability for violating that standard.

This is a transcript of a roundtable discussion between Robert Pritzker of The Marmon Group, Inc., Vice-Chancellor Jack Jacobs of the Delaware Court of Chancery, and Law Professors William Carney, Richard Painter, and Robert Sitkoff, with Professor Carney serving as moderator. The general topic was corporate governance. Among other things the participants discussed the implications of information provided by Mr. Pritzker regarding Smith v. Van Gorkom. Mr. Pritzker stated that the $55 price and the one-week deadline were established by Jerry Van Gorkom, not the Pritzkers. Mr. Pritzker also described the terms and the motivations for the Pritzkers' contribution to the settlement. Finally, in addition to analysis of the Van Gorkom decision, the panel also discussed public and private boards of directors, the Caremark decision, and corporate charitable and political contributions. The roundtable was held under the auspices of the Theory Informs Business Practices Symposium at the Chicago-Kent College of Law on April 6, 2001.

One of the most profound transformations in Delaware corporation law since 1985 has been the development of new standards of judicial review, as well as novel applications of existing standards. Although the result of these developments has been positive, the developments have also, in some instances, become dysfunctional in the sense that their articulation and/or application has not adequately taken into account the policies underlying the standards and thus has failed to advance the core values of corporation law. In this Article, the authors explore these post-1985 doctrinal problems in five separate areas: (i) the review standard misapplied in duty of care cases; (ii) the improper linkage of the duty of care to entire fairness review; (iii) the failure of courts to defer to effective intra-corporate fairness procedures; (iv) the unnecessary linkage of the intermediate "reasonableness" standard of review to the business judgment and entire fairness standards; and (v) the "compelling justification" test and the unnecessary proliferation of review standards. The authors conclude that some doctrinal reformulation is needed in these areas to make the existing standards of review truly functional, i.e., adequately aligned with their underlying policy purpose so as to provide directors with incentives to act in order to advance corporate and shareholder interests, and simplified and rationalized to make the standards useful tools for judicial decisionmaking. The authors propose three basic reformulated review standards that would achieve these goals.

How legal systems organize and coordinate economic factors of production within firms contributes importantly to the production of wealth in any society. In our market-centered liberal democracy, that function is facilitated by the law of property, contract, agency, partnership, and corporations, among other fields. Few, of course, would claim that the law of business organization is the primary driver of a society's economic productivity.1 More elementary variables such as technology, education, availability of capital, and even social values such as diligence and self-restraint, are vital ingredients as well. But at least since the collapse of the Sovietstyle planned economy as a potential alternative system, it has been clear, even to those who could not see it before, that the law of enterprise organization plays an important role in facilitating economic welfare. That