The Journal hosts the Annual Francis G. Pileggi Distinguished Lecture in Law. This lecture series, held in Wilmington, Delaware, is presented to the Delaware Bench and Bar and focuses on developing issues in the area of corporate law. The lecturer is always a leading voice in the field of corporation law, and the lecture provides the Delaware Bar, particularly the members of the bench on both the Court of Chancery and the Supreme Court, an opportunity to challenge academia with practical concerns.
THIS YEAR:
The Delaware Journal of Corporate Law
Welcomes
Professor
Eric Talley
the 2008-2009
Francis G. Pileggi Distinguished Lecturer in Law.
October 10, 2008 - The Hotel du Pont, Wilmington, DE
TOPIC:
How Complexity Simplifies Corporate Law, Governance, and Incentives
ABSTRACT:
Complexity makes corporate law and governance both challenging and interesting. Indeed, the modern corporate enterprise must mediate and regulate a vast number of conflicting interests, claims, constituencies and authority relationships. Within the shadowy interstices of these conflicts, coordination and incentive problems tend to propagate and thrive. In many ways, the key challenge of corporate law is that of constructing balance amid the chaos of these competing forces.
Given this challenge, it is striking that corporate law (within and increasingly outside Delaware) tends to reflect a myopic attraction to the “shareholder primacy” account of the firm, where corporate fiduciaries’ core objective is to act with care, good faith and loyalty to maximize shareholder value alone. In recent years, in fact, both the Delaware legislature and its courts have moved to maintain and even strengthen law’s focal celebration of shareholder primacy.
This address considers why the shareholder primacy norm has proven to be such a stubborn and formidable conceptual trope. I review many of the standard arguments in defense of shareholder primacy, and find them – while not wholly irrelevant – to be inadequate to hold off their critics. Instead, I argue that we would be well served to reexamine the debate in light of recent advances in behavioral finance. Doing so reveals insights suggesting that the simple mandate embodied by the shareholder primacy norm may – ironically – be the best response to the complexity that corporations confront. I apply these insights to a number of contexts within Delaware law, including the fiduciary duty of good faith, the regulation of shareholder activism, and fiduciary duties in the (so-called) zone of insolvency. At the end, the shareholder-primacy norm (or something very close to it) may be our best hope for a system whose complexity is administrated by actors who are themselves boundedly rational.
BIOGRAPHY:
Professor Talley is the Co-Director of the Berkeley Center for Law, Business, and the Economy at the University of California, Berkeley. Professor Talley joined the faculty of Boalt Hall in 2006. For the 2008-2009 academic year, Professor Talley is a Visiting Professor of Law at Harvard Law School. From 1995-2006, Professor Talley was part of the faculty at the University of Southern California Law School.
Professor Talley a leading expert on the intersection corporate law, governance and finance. He has been teaching and researching in law schools, economics departments and business schools for over a decade, covering courses in Corporate and Commercial Law, Contracts, Law and Economics, Corporate Finance, Mergers and Acquisitions, Quantitative Methods in the Law, Securities Regulation/Fraud, Behavioral Law and Economics, and Law and Game Theory.
Also affiliated with the RAND Corporation, Professor Talley teaches and does research in areas such as stockholder rights, corporate litigation and securities. He has published articles in many of the nation’s most respected legal journals, including the Yale Law Journal, the Stanford Law Review, the Columbia Law Review, the University of Chicago Law Review, the University of Pennsylvania Law Review, the Journal of Law, Economics and Organization, Games and Economic Behavior, the Journal of Finance, and the Journal of Legal Studies, and the Southern California Law Review. Recent publications include “Going-Private Decisions and the Sarbanes-Oxley Act of 2002: A Cross-Country Analysis (Forthcoming, J. Law Econ. & Org.); “Public Ownership, Firm Governance, and Litigation Risk” (Forthcoming, U. Chicago L. Rev); “Cataclysmic Liability Risk among Big-4 Auditors: An Empirical Analysis” (Columbia Law Review 2006); “Public Versus Private Provision of Corporate Law” (Journal of Law, Economics, and Organization, 2006) and “Unregulable Defenses and the Perils of Shareholder Choice” (University of Pennsylvania Law Review, 2003).
Professor Talley holds a bachelor’s degree from the University of California, San Diego, and a J.D. from Stanford University, where he served as articles editor for the Stanford Law Review. He also received Ph.D. at Stanford in economics. He is currently Professor of Law at the University of California, Berkeley, and Visiting Professor of Law at Harvard Law School. From 2001-2004, where he serves as co-director of the Berkeley Center for Law, Business and the Economy. He has been an Alfred P. Sloan Fellow and visiting professor at Georgetown, a visiting professor at the California Institute of Technology, and a John Olin Foundation fellow and instructor at Stanford. Until July 2006, he was the Ivadelle & Theodore Johnson Professor of Law and Business at the University of Southern California, with joint appointments in the Gould School of Law and the Marshall School of Business (finance and business economics group). From 2001-2004, he served as director of the USC Center for Law, Economics and Organization and of USC’s Olin Program in Law and Rational Choice. He is currently a director of the American Association of Law and Economics, and former chair of the American Association of Law Schools section in Law and Economics, and chair of the American Association of Law Schools section in Contracts. He is a frequent commentator on the national radio show Marketplace, and speaks frequently to corporate boards on issues pertaining to fiduciary duties, corporate governance, and financial analysis.
Among Professor Talley’s notable recent publications are: “On Public versus Private Provision of Corporate Law” (with Hadfield) in the Journal of Law Economics & Organization (2006); “Unregulable Defenses and the Perils of Stockholder Choice” (with Arlen) in the University of Pennsylvania Law Review (2003; named one of the 10 best corporate and securities articles of the year by Corporate Practice Commentator); “Turning Servile Opportunities to Gold: A Strategic Analysis of the Corporate Opportunities Doctrine” in the Yale Law Journal (1998; also named as one of the 10 best corporate and securities articles of the year by Corporate Practice Commentator); “Endowment Effects Within Corporate Agency Relationships” (with Arlen and Spitzer) in the Journal of Legal Studies (2001); and “A Theory of Legal Presumptions” (with Bernardo and Welch) in the Journal of Law, Economics and Organization (2000).
Past Pileggi Lecturers include:
2007-2008: Professor Mark J. Roe
2006-2007: Professor Hillary A. Sale
2005-2006: Professor Stephen Bainbridge
2004-2005: Professor Melvin A. Eisenberg
2003-2004: Professor Robert B. Thompson
2002-2003: Dean Harry J. Haynsworth
2001-2002: Professor Lynn A. Stout
2000-2001: Professor Charles M. Elson
1999-2000: Professor Ronald J. Gilson
1998-1999: Professor Larry E. Ribstein
1997-1998: Dean Joel Seligman
1996-1997: Robert R. Keatinge, Esquire
1995-1996: Professor Donald D. Langevoort
1994-1995: Professor John C. Coffee, Jr.
1993-1994: The Honorable Henry R. Horsey
1992-1993: Professor Deborah A. DeMott
1991-1992: Professor Richard M. Buxbaum
1990-1991: Lawrence J. Bugge, Esquire
1989-1990: A.A. Sommer, Jr., Esquire
1988-1989: Professor Harvey L. Pitt
1987-1988: Professor Louis Loss
1986-1987: The Honorable Ralph K. Winter, Jr.
1985-1986: Professor Robert W. Hamilton