Document Type

Article

Publication Date

1992

Center/Program

Center on Corporate Governance

Center/Program

Center for Law and Economic Studies

Abstract

Nothing in The American Law Institute's (ALI) Principles of Corporate Governance: Analysis and Recommendations (Principles) proved more controversial than the effort to develop fair and balanced standards for the derivative action. Only the topic of corporate takeovers seems to evoke an equally intense level of emotion among corporate lawyers. Not surprisingly then, Part VII (Remedies) of the Principles attracted the same attention from critics that a lightning rod does in a thunderstorm.

Unlike other ALI Restatements, however, the Principles also encountered a professional opposition, which lobbied against its adoption, both inside and outside the ALI, on behalf of various outside groups. The central charge of these critics, repeated endlessly and loudly, was that the Principles in general, and Part VII in particular, relied on a "litigation model of corporate governance," which distrusted directors and asked courts to manage the corporation.1

Within the ALI, these pejorative charges never worked. The ALI's members read the Reporters' drafts, heard the floor debate, and resoundingly defeated, year after year, the motions advanced by The Business Roundtable's spokespersons. In turn, the Reporters listened to the ALI's comments and criticisms (and also those of CORPRO, the ABA liaison committee to the Project), rephrased and fine-tuned their drafts, until eventually a compromise position was reached that received the approval of an overwhelming majority of the ALI's members.

Comments

©1992 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association

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