The Us Corporate Elephant

Abstract

Drawn from a speech at the opening convocation at two notarial schools in Italy, this is a story of modern US corporate law. Unlike the statist nature of the corporation in many other countries, the nature of the US corporation is essentially private. It is based on state corporate law, chosen by the parties. Federal law, though regulating disclosure to public investors, mostly avoids a role in the management of the corporation. The corporation rules of state law are largely enabling, not mandatory. The parties have a wide latitude in choosing their own structures. The preeminent provider of state law is Delaware, whose preeminence comes from offering a balanced package of legislative responsiveness, legal expertise, judicial expertise and efficiency, comprehensive case law, and assurances of being non-political. Corporate law in the United States provides only basic creditor protections, assuming that most protections will come through markets and contracts. Significant emphasis is placed on fiduciary duties of corporate directors - to the corporation and shareholders. Fiduciary duties are dynamic, adapting to new governance and market circumstances. Also dynamic are other aspects of corporate law, as illustrated by the legislative, administrative and judicial responses to recent corporate and accounting scandals. Some aspects of corporate law, fundamental to the legitimacy of the corporation, remain unaddressed. The role of the corporation in politics, the place of institutional investors in corporate governance, the responsibility of the corporation for social and environmental practices not mandated by law - these are the current questions for corporate law. Will the corporation be up to the task?