Abstract
In a recent article, we have put forward a new approach to takeover law and regulatory competition. We proposed a “choice-enhancing” federal intervention that would provide: (i) an optional body of substantive federal takeover law which shareholders would be able to opt into (or out of) and which would be more hospitable than existing state takeover law, and (ii) a mandatory process rule that would provide shareholders the right to initiate and adopt, regardless of managers’ wishes, proposals for option into (or out of) the federal takeover law. In this paper, we respond to a critique of our proposal by Professors Stephen Choi and Andrew Guzman, and we further develop the case for choice-enhancing intervention. JEL Class: G30, H70, K22. 2001 Lucian Bebchuk and Allen Ferrell. All rights reserved. * William J. Friedman & Alicia Townsend Friedman Professor of Law, Economics and Finance, Harvard Law School; Research Associate, National Bureau of Economic R esearch. ** Assistant Professor of Law, Harvard Law School. We would like to thank the Harvard Law School John M. Olin Center for Law, Economics and Business for its financial support. Future revisions of this paper will be available for downloading from http://www.law.harvard.edu/faculty/bebchuk.
Highlights
A New Approach to Takeover Law and Regulatory Competition,[1] we put forward a novel form of federal intervention in the regulation of takeovers by states
Choice-enhancing intervention, we argued, is clearly superior to the current regulatory regime in which states are primarily responsible for takeover regulation
The second component of choiceenhancing intervention consists of a federal process rule, preempting contrary state law, which would grant to shareholders the right to opt into this body of federal takeover regulation, regardless of incumbent managers’ preferences
Summary
A New Approach to Takeover Law and Regulatory Competition,[1] we put forward a novel form of federal intervention in the regulation of takeovers by states. We labeled this approach “choice-enhancing” intervention given its focus on enhancing shareholder choice. Choice-enhancing intervention, we argued, is clearly superior to the current regulatory regime in which states are primarily responsible for takeover regulation. The second component of choiceenhancing intervention consists of a federal process rule, preempting contrary state law, which would grant to shareholders the right to opt into (or out of) this body of federal takeover regulation, regardless of incumbent managers’ preferences. Part III will conclude with a remark on how the introduction of choiceenhancing federal intervention should trigger a reassessment of the positions taken by supporters of unconstrained regulatory competition
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