Directors as Auctioneers: A Guide To Revlon-Land

Stephen Bainbridge has a new e-book out about a 25-year-old Delaware Supreme Court case.

What’s the book about? In Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986), the Delaware Supreme Court explained that when a target board of directors enters Revlon-land, the board’s role changes from that of “defenders of the corporate bastion to auctioneers charged with getting the best price for the stockholders at a sale of the company.”

Unfortunately, the Court’s colorful metaphor obfuscated some serious doctrinal problems. What standards of judicial review applied to director conduct outside the borders of Revlon-land? What standard applied to director conduct falling inside Revlon-land’s borders? And when did one enter that mysterious country?

By the mid-1990s, the Delaware Supreme Court had worked out a credible set of answers to those questions. The seemingly settled rules made doctrinal sense and were sound from a policy perspective.

Indeed, my thesis herein is that Revlon and its progeny should be praised for having grappled—mostly successfully—with the core problem of corporation law: the tension between authority and accountability. A fully specified account of corporate law must incorporate both values. On the one hand, corporate law must implement the value of authority in developing a set of rules and procedures providing efficient decision making. U.S. corporate law does so by adopting a system of director primacy.

It’s available for your Kindle for $9.99 and includes “free wireless delivery via Amazon Whispernet.” That’s probably worth 10 bucks alone.

FILED UNDER: James Joyner, Law and the Courts, Quick Picks
James Joyner
About James Joyner
James Joyner is the publisher of Outside the Beltway, an associate professor of security studies at the Command and Staff College, Marine Corps University, and a nonresident senior fellow at the Brent Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. He earned a PhD in political science from The University of Alabama. Views expressed here are his own. Follow James on Twitter.