The Case Against Statutory Menus in Corporate Law
Journal
Hastings Business Law Journal
ISSN
1554-849X
Type
journal article
Date Issued
2012-09-01
Author(s)
Abstract
There seems to be a virtual consensus among corporate law scholars that state legislatures should enable corporations to select governance terms from a menu of predefined statutory rules. In this Article, I challenge this view.
The private sector has produced menus of contract terms, such as standard form contracts and model documents, long before the idea of statutory menus be-came fashionable. There is no evidence that the market for private menus has failed, and legislatures are unlikely to be efficient menu producers. Advocates of statutory menus have suggested a number of rationales, most notably considera-tions based on transaction costs, network and learning effects, bounded attention, or endogenous preferences. But at closer look, none of these justifications are plausible, if nothing else because they equally apply to private menus. The exist-ing statutory menus do, however, clarify that certain governance terms are legal in cases where this would otherwise be uncertain. Yet that uncertainty should be reduced by other means than menus. For these reasons, menu production should be left to the private sector.
The paper is available in full text on SSRN: http://ssrn.com/abstract=2024876.
The private sector has produced menus of contract terms, such as standard form contracts and model documents, long before the idea of statutory menus be-came fashionable. There is no evidence that the market for private menus has failed, and legislatures are unlikely to be efficient menu producers. Advocates of statutory menus have suggested a number of rationales, most notably considera-tions based on transaction costs, network and learning effects, bounded attention, or endogenous preferences. But at closer look, none of these justifications are plausible, if nothing else because they equally apply to private menus. The exist-ing statutory menus do, however, clarify that certain governance terms are legal in cases where this would otherwise be uncertain. Yet that uncertainty should be reduced by other means than menus. For these reasons, menu production should be left to the private sector.
The paper is available in full text on SSRN: http://ssrn.com/abstract=2024876.
Language
English
Keywords
Corporate law
menus
standard form contracts
legislation
policy analysis
private lawmaking
United States
HSG Classification
contribution to scientific community
HSG Profile Area
LS - Business Enterprise - Law, Innovation and Risk
Refereed
Yes
Publisher
HeinOnline
Publisher place
Buffalo NY
Volume
9
Number
1
Start page
45
Subject(s)
Division(s)
Eprints ID
210622
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Name
SSRN-id2024876.pdf
Size
511.75 KB
Format
Adobe PDF
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