“Nearly all standard corporate-law casebooks include an account of the significant line of cases in which the federal courts reviewed the constitutionality of state antitakeover statutes. These textbooks, however, go on to express the accepted view among researchers and practitioners that these cases are no longer relevant to contemporary corporate law, because a private-law innovation—the poison pill—now dominates the antitakeover influence of state statutes. In this Article, we argue that this widely shared view is mistaken.
“We show that the cases in which the federal courts have evaluated the constitutionality of state antitakeover statutes raise serious questions about the validity of the state-law rules authorizing the use of the poison pill.”
“The Supreme Court’s decision in Shelby County v. Holder revitalizes the oldest and most demeaning official insult to African Americans in American constitutional history. Written by Chief Justice Roberts, the majority opinion relies on an unwritten principle that Roberts calls states’ ‘equal sovereignty’ to justify the Court’s decision to topple a landmark piece of legislation: Section 4 of the Voting Rights Act. Chief Justice Roberts fails, however, to acknowledge the origin story of this ‘equal sovereignty’ principle, which can be traced back to the Court’s infamous decision in Dred Scott v. Sandford. Shelby County is the first decision since Dred Scott to invoke the doctrine of equal sovereignty where the right to vote was involved. And, once again, just as the Court did in Dred Scott, the Court in Shelby County held that the ‘equal sovereignty’ of the State of Alabama takes precedence over Congress’s exercise of its explicit constitutional power to enforce the voting rights of the descendants of slaves. …
“Sadly, the disinterment of Dred Scott appears not to be a simple oversight. Revitalizing the equal sovereignty principle—without acknowledging its racially discriminatory pedigree—arguably suggests that the Supreme Court majority is attempting to head off congressional reconsideration of the right to vote as one of the fundamental privileges and immunities endowed by the Constitution on every person who becomes a citizen of the United States. Such action by Congress—using its enforcement power under Section 5 of the Fourteenth Amendment—could assure African Americans, as well as all whites, Latinos, and other Americans, that threats to their full and free exercise of the franchise, and to their status as equal citizens, can be overcome through national legislation. But unless a social movement of academics, lawyers, and an aroused people emerges to push Congress to recover the Fourteenth Amendment Privileges or Immunities Clause, that Clause—which holds the promise of a fundamental right to vote—shall remain virtually a dead letter in constitutional jurisprudence.”
“Recently, leading … corporate law judges have indicated in off-the-bench analyses that [investor] short-term-ism is something they take seriously. …
“Here, I evaluate the evidence in favor of [the short-termist] view and find it insufficient to justify insulating boards from markets further. While there is evidence of short-term stock market distortions, the view is countered by several underanalyzed aspects of the American economy, each of which alone could trump a prescription for more board autonomy. …First, … one must evaluate the American economy from a system-wide perspective. As long as venture capital markets, private equity markets, and other conduits mitigate, or reverse, much of any short-term tendencies in public markets, then a potential short-term problem is largely local but not systemic. Second, the evidence that the stock market is, net, short-termist is inconclusive, with considerable evidence that stock market sectors often overvalue the long term. Third, managerial …compensation packages with a duration that is shorter than typical institutional stock market holdings, and managerial labor markets … are important sources of short-term distortions; insulating boards from markets further would exacerbate these managerial short-term-favoring mechanisms. Fourth, courts are not well positioned to make this kind of basic economic policy, which, if determined to be a serious problem, is better addressed with policy tools unavailable to courts. And, fifth, the widely held view that short-term trading has increased dramatically in recent decades over-interprets the data; the duration for holdings of many of the country’s major stockholders, such as mutual funds … and major pension funds, does not seem to have shortened. Rather, a high-velocity trading fringe has emerged, and its rise affects average holding periods, but not the holding period for the country’s ongoing major stockholding institutions.
“The view that stock market short-termism should affect corporate lawmaking fits snugly with … other widely supported views. One is that … employees, customers, and other stakeholders are due more consideration in corporate governance. … But these stakeholder considerations can be long-term and they can be short-term. … [T]he pro-stakeholder view must stand or fall on its own.”