The Structure of the Corporation: A Legal Analysis

A detailed legal examination of the inner workings of the modern publicly held corporation.

This book examines the roles of officers, directors, and shareholders in the governance of the modern publicly held corporation. The book shows that these corporations are managed by the senior executives, not by the board of directors. The role of the board is not to manage, but to select the managers, monitor the managers’ conduct of the corporation’s business, and approve major changes in the corporation’s legal or business structure. To this end, the board should be composed of a majority of independent directors, and for certain purposes those directors should be constituted as a separate corporate organ. To perform its monitoring function, the board must have reliable information on the corporation’s financial performance by outside independent accountants. The book also shows that the shareholders’ voting right is very important, because with the rise of institutional shareholdings, share ownership is much more concentrated than was previously believed. Finally, the book develops the importance of appraisal rights, especially as an ultimate check on managerial conflicts of interest in structural transactions, such as mergers. This volume belongs on the shelves of lawyers and businessmen.

Melvin Aron Eisenberg is Koret Professor of Law at School of Law, University of California, Berkeley. In addition to a distinguished teaching career, he was in private practice and also served as assistant counsel to the President’s commission on the assassination of President Kennedy (Warren Commission). He is the author of numerous books, and is presently a consultant to the American Bar Association’s Committee on Corporate Law.

Preface		vii
1.	Introduction: The Received Legal Model of the Corporation	1
Part I. The Legal Role of the Body of Shareholders		7
2.	Voting Rights in Closely Held Corporations: A Normative Model	9
3.	Voting Rights in Publicly Held Corporations: Three Schools of Thought	18
4.	Voting Rights in Publicly Held Corporations: The Conflict-of-Interest	30
5.	Voting Rights in Publicly Held Corporations: The Expectations of Shareholders	37
6.	Voting Rights in Publicly Held Corporations: A Normative Model	64
7.	The Place of the Appraisal Right in a Normative Model of the Corporation	69
8.	The Uses of a Normative Model	85
Part II. Access to the Corporate Proxy Machinery		95
9.	Access to the Corporate Proxy Machinery in Connection with the Election of Directors	97
10.	Access to the Corporate Proxy Machinery in Connection with Matters Other than Election to Office	128
Part III. Management Service		137
11.	Officers and Directors	139
12.	The Flow of Information to the Board and the Role of the Accountant	186
Part IV. Structural Changes: Corporation Combinations		213
13.	The Stock Modes -- An Introduction: The De Facto and Equal-Dignity Theories of Statutory Interpretation	215
14.	Stock-for-Assets Combinations	224
15.	Stock-for-Stock Combinations	238
Part V. Structural Changes: Contractions and Divisions		253
16.	Contractions: Sell-Offs and Partial Liquidations	255
17.	Corporate Divisions: Spin-Offs, Split-Offs, and Split-Ups	267
Part VI. Voting and Appraisal Rights in Parent-Subsidiary Complexes		275
18.	Wholly Owned Subsidiaries	277
19.	Subsidiaries with Public Ownership	308
20.	Conclusion: Normative Models of the Corporation	316
Table of Cases		321
Index		323