Consent in Corporate Law
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Consent in Corporate Law
By Lawrence A. Hamermesh*
Recent Delaware case law explores and extends what the author describes as the doctrine
of corporate consent, under which a stockholder is deemed to consent to changes in the
corporate relationship that are adopted pursuant to statutory authority (such as by direc-
tors adopting bylaws). This essay examines whether and to what extent there may be limits
on the application of the doctrine of corporate consent and whether fee-shifting bylaws ex-
ceed those limits.
I invite you to ponder precisely what you consent to when you buy a share of
stock of a corporation. It's a superficially simple but deceptively complex ques-
tion. At the outset, of course, the answer depends on what it means to consent.
A fairly demanding, but still plausible, description holds that [c]onsent is an act
of reason, accompanied with deliberation, the mind weighing as in a balance the
good or evil on each side.i
So, in what deliberation or weighing do you engage when you buy stock?
Speaking for myself, not much. I am aware that I am parting with money; and
I do so in the hope of financial gain, through distributions of corporate profit or
selling the stock in what I hope is a rising market. I may also be aware that I'll get
pesky annual messages inviting me to engage in the preposterously pointless act
of voting my nearly infinitesimal percentage of shares on the election of directors
and other matters as to which I am at best rationally apathetic, if not downright
resistant. Usually, I just leave it to others to make my investment decisions for
me. If consent is an act of reason, the consent I give when I buy stock is atten-
uated at best.
But I urge that corporate law requires a less stringent definition of consent in
order to function effectively, one that doesn't demand actual deliberation and
weighing of all of the complex, specific elements of the corporate relationship.
Let me give an example, the first in a series of what I call corporate consent stories.
* Professor Hamermesh is the Ruby R. Vale Professor of Corporate and Business Law at the Wide-
ner University Delaware School of Law, Wilmington, Delaware. This essay, in slightly modified form,
was originally presented as the 2014 Ben Beinart Memorial Lecture at the University of Cape Town,
South Africa. Professor Hamermesh is a member of the Council of the Corporation Law Section of the
Delaware State Bar Association, but the views expressed in this essay do not represent the views of the
Council, the Section, or the Bar Association, and may not even represent the author's views as they
develop on further reflection. The essay likewise does not represent the views of Leo E. Strine, Jr.,
who contributed several useful suggestions.
1. Lervick v. White Top Cabs, Inc., 10 So. 2d 67, 73 (La. Ct. App. 1942).
161](ViewImageLocal?handle=hein.journals/busl70&div=9&collection=&method=preview&ext=.png&size=3)
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Consent in Corporate Law
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