A New New Look at Corporate Opportunities

Abstract

The corporate opportunity doctrine - which operates as the principal device in U.S. law prohibiting corporate fiduciaries from diverting to their own benefit business prospects properly deemed corporate assets - often favors the development of disputed opportunities with an incumbent firm. After reframing the corporate opportunity doctrine as a boundaries of the firm problem, this paper demonstrates that the doctrine reflects the historical period of its development - the 1930s, when the large-scale, vertically integrated emerged as the dominant form of business organization - and reinforces, in potentially inefficient ways, this historically contingent vision of the firm. Using recent literature on the new economy and the network form of organization as a leading recent example, the paper then shows that firms are heterogeneous and evolve over time in ways that require a more flexible opportunities law. Finally, the paper suggests that alternative current legal doctrines - many of which did not exist or were incompletely elaborated when the corporate opportunity doctrine developed - now provide satisfactory substitute protection for the corporate interest in new opportunities. The Article thus concludes that repeal of the corporate opportunity doctrine, or (at a minimum) narrow judicial construction of existing doctrine, will maximize outcomes for corporations and their constituencies, including shareholders.