Copyright (c) 2005 Willamette Law Review
Willamette Law Review
COMMENT: DELAWARE COURTS' DELICATE RESPONSE TO THE CORPORATE GOVERNANCE SCANDALS OF 2001 AND 2002: HEIGHTENING JUDICIAL SCRUTINY ON DIRECTORS OF CORPORATIONS
41 Willamette L. Rev. 207
Jeffrey D. Hern*
Corporate law is a product of both federal and state law. Prior to 2001, the dichotomy between federal and state law in the area of corporate law seemed well established. The federal government played a limited role, primarily enacting disclosure-type laws - laws aimed at requiring corporations to make certain information about themselves available to the public. 1 For example, the federal government, through Congress and federal administrative agencies, implemented the Securities Act of 1933 2 (mandating what information must be made available prior to public offerings) and the Securities Exchange Act of 1934 3 (governing securities trading). The bulk of corporate law, however, came from the states. State law historically governed the internal affairs of corporations, 4 meaning it governed the legal relationships among the corporation, the corporate managers, and the shareholders. 5
This structure, though, is not required. The division of corporate law authority, as described, is not a "crisp constitutional rule." 6 In fact, the United States Constitution empowers the federal government to make all corporate laws. Under the Commerce Clause, Congress has the enumerated power to "regulate commerce ... among the several states," 7 and under the Supremacy Clause, any federal law trumps state law when the two conflict. 8 Thus, the combination of those two clauses establishes that the federal government holds the ultimate authority on corporate law. If the federal government ever wants to dictate corporate law, it can. The states, particularly Delaware, are well aware ...
If you are interested in obtaining a lexis.com® ID and Password, please contact us at 1-(800)-227-4908 or visit us at http://www.lexisnexis.com/.