Well before the Covid-19 pandemic, policymakers and scholars were focused on the debate over corporate purpose and the fragility of an economic system marked by stagnation and runaway inequality. As a solution, many urged a shift from shareholder primacy (the credo that the main duty of corporate directors is to maximize wealth for shareholders) to a stakeholder approach, under which directors must create value for all constituencies of the corporation, including employees, customers, suppliers, and local communities. Such an approach – which promotes a seemingly radical change in how boards of directors make decisions – has historically appealed to two very distinct groups: progressives who welcome a switch to a more holistic view of the enterprise and incumbent executives and their supporters who believe the stakeholder approach would provide greater relief from shareholder pressures.
Corwin v. KKR is considered one of the most important corporate law decisions of this century. Corwin shields directors from the enhanced scrutiny of Revlon in favor of the business judgment rule whenever a transaction “is approved by a fully informed, uncoerced vote of the disinterested stockholders.” Commentators see Corwin as the poster child of an increasingly more restrained approach by Delaware courts—something labeled with expressions such as “Delaware’s retreat,” “the fall of Delaware standards,” and even “the death of corporate law.”
Supporters of the decision applaud the shift from courts to markets in determining whether directors satisfactorily performed in the sale of the company. In an age of enhanced investor sophistication due to the growing size of institutional ownership, the argument goes, the judiciary has ceded the role of optimal decision maker to shareholders. However, the mainstream view among scholars is that Corwin is a setback in shareholder protection. To some, directors’ legal obligations are now limited to full disclosure. Others think that enhanced scrutiny is no longer available and the sole constraint directors face is the shareholder vote. In the views of critics of Corwin, the structure, nature, and quality of the substitute (vote vs. judicial review) are not compelling.