Chief Justice of Delaware high court speaks at USC

The Honorable Leo E. Strine Jr., the eighth Chief Justice of the Delaware Supreme Court, spoke to the Gould School of Law students on Thursday about the implications of European Union and United States corporate law on stockholders.

The event marked the 2015 installment of the Justice Lester W. Roth lecture series.

Strine began his comparative law lecture by addressing the debate over whether E.U. or U.S. corporate law statutes are more stockholder friendly. He argued that the claim that E.U. policies better benefit stockholders relies too heavily on paper law as opposed to how it operates in practice.

“E.U. corporate law works better for stockholders like the Soviet Union protected human rights better than the United States,” Strine said.

He continued the talk by stating that those making the claim in favor of E.U. over U.S. corporate law ignore the reality of American corporate law — stockholders in the United States exercise legal and empowerment rights more frequently than E.U. stockholders.

Strine addressed the global discussion on whether the United States should adjust certain policies to more closely model E.U. corporate law. He emphasized how important it is to understand the social and regulatory context within which corporate governance operates. U.S. corporations, for example, focus solely on the well-being of their stockholders, whereas E.U. companies consider all constituents, including labor and creditors.

“Scholars in the United States have discussed the means of corporate governance,” Strine said. “And they confuse it with the question of whether focus on stockholder welfare is a primary end. In this respect, the U.S. may use a more republican model than the E.U., but it does so only to best advance its stockholders’ welfare.”

The lecture continued with Strine elaborating on the different end E.U. corporate law has compared to the United States.

It is the normative duty of E.U. company directors to take into account the interest of all constituencies. Strine provided the example of the German codetermination model in which employees sit in at least half of the seats on the advisory boards of large companies. He stated that practices, such as firms being required to regularly release company information to constituents, are common among the member nations of the E.U.

Contrastingly, a vast number of jurisdictions in the United States do not have constituency statutes; in the United States, the only constituency with legal rights are the stockholders. Labor is not required to have board seats or voting rights, and creditors only have influence in the case of solvency.

Strine then argued that despite E.U. stockholders appearing to have more influence than U.S. stockholders on paper, empirical evidence on the practical power of American stockholders suggests differently.

He said that U.S. corporate law allows for an environment that allows stockholders not only greater defensive action, but also more deals and transactions.

“You have to let the bidders feel like they can get a fair shake, and in many ways, it’s more difficult for bidders to operate in the E.U.,” Shrine said. “In the U.S., you have to be active. You have a duty … to try and explore the marketplace to make sure stockholders are getting the best deal.”

Strine ended by claiming that before the U.S. can decide to adopt E.U. corporate policies or vice versa, the context in which the law operates should be understood.

Andrew T. Guzman, dean of USC Gould, expressed how honored USC was to have Strine join the list of Roth Lecture speakers.

“Chief Justice Strine challenges convention,” Guzman said. “Looking at his judicial decisions is only part of the picture. He’s also without any question one of the leading commentators and voices on corporate law. It’s fair to say that there’s no one today who’s had a larger role in shaping and articulating corporate law in this country than Chief Justice Leo E. Strine.”

Prior to becoming the chief justice, Strine served on the Delaware Court of Chancery. While serving on the Court of Chancery, Strine wrote over a hundred opinions, particularly in the area of corporate law.

He was also counsel to Gov. Thomas R. Carper of the State of Delaware, a corporate litigator at the firm of Skadden, Arps, Slate, Meagher & Flom and a law clerk to Judge Walter K. Stapleton and Chief Judge John F. Gerry.