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11 Bus. Law. Update 1 (1990-1991)

handle is hein.journals/buslwme11 and id is 1 raw text is: DA Other CIItIItkhcy Statutes: 'A New Form of Welfarism? By A.A. Sommer, Jr. Morgan, Lewis & Bockius Washington, DC Editor's Note: The Corporate Laws Com- mittee has published a report on ',other con- stituencies in the August issue of The Business Lawyer (Other Constituencies Stat- utes: Potential for Confusion, 45 Bus. L. 2253 (1990)). The report criticizes the emer- gence of state corporate law statutes that au- thorize, and in some cases mandate, corporate directors to take into account the interests of constituencies other than shareholders. We have asked A.A. Sommer, Jr., chair of the task force that produced the report, and Ste- phen Wallman, a dissenting member of the task force, to summarize their views on this controversial issue for the UPDATE. Wall- man's article will appear in the November! December issue. T he takeover wars of the 80s, like all wars, caused the combatants to adopt tactics and take measures to meet the demands of the moment without thought for future consequences (re- member the nuclear bombing of Hiro- shima and Nagasaki?). Now that the wars are over-or at least abated for the moment-it's time to take stock and see what price we're going to pay in the fu- ture for those tactics and measures. One of the tactics used by defenders of the corporate citadel was importun- ing cooperative -legislators and gover- nors, concerned with losses of local industry, to adopt so-called other con- stituency statutes-laws that gave di- rectors of locally incorporated companies the power to take into ac- count constituencies other than shareholders-employees, communi- ties, customers, and suppliers. Half of the states have adopted these statutes in one form or another. rSome of the statutes, notably Indi- ana's and Pennsylvania's, make abun- dantly clear this power permits directors to put the interests of these other con- stituencies ahead of shareholders if they so desire. While the other 23 states have not made it so clear, there is evi- dence that was their intent, too. Con- necticut bought the farm by mandating that directors of Connecti- cut corporations registered with the SEC take into account other constituencies. Anyone want to be a director of a Con- necticut corporation? Interestingly, some of the defenders of these statutes seem to favor the Connecticut form: They speak of unjust enrichment of shareholders because of takeover pre- mia, breaches of implicit contracts with the other constituencies, and inefficien- cies because of the maldistribution of gains realized by shareholders. These statutes were supposed to per- mit directors to, say, rebuff a hostile tender offer at a large premium if the Continued on page 2 'September/October 1990 Volume 11 Number 1 Section of Business Law /LN From the Section Chair... By George Clemon Freeman, Jr. O ur Section has a tradition of collec- tive leadership. Major long-term policy decisions are made by our Coun- cil, of which all officers are ex officio members. The Council acts after full consultation with our committee chairs. The Section chair's role each year is to see that these policies are carried out effectively and to help set new priori- ties. This year we will continue the efforts to broaden participation in our Section. During this past year under Jean Al- lard's leadership we made major efforts to reach out to women and minorities and bring them onto our major com- mittees and into positions of leader- ship. We have also encouraged younger lawyers to join our working committees through an open membership policy. These outreach efforts will continue. We have also been concerned with our recent loss of rank among the ABA sec- tions. For many years, we were first. Last year, however, the Litigation Section pulled ahead of us. I call on each of you, whether you work in a law firm or cor- Continued on page 2 IN SID E The role of institutional investors is changing views of corporate governance 3 This issue spotlights the Bankruptcy Committee 5 Meet our staff 6 Delaware amends its corporation, limited partnership, and business trust laws 7 ABA addresses homelessness 10

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