The Professorial Bear Hug: The ESB Proposal as a Conscious Effort to Make the Delaware Courts Confront the Basic "Just Say No" Question

Abstract

As one of the ten Delaware judges to whom the central policy argument of The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence, and Policy' is directed, I am constrained to reply to the excellent, thoughtprovoking article by Professors Bebchuk, Coates, and Subramanian in a more oblique fashion than the other commentators. For obvious reasons, I will not enter into the normative debate regarding the desirability of hostile takeovers or whether state corporation law should facilitate or impede the ability of acquirors to make, and stockholders to accept, structurally noncoercive, allshares tender offers. Nor will I comment on the reliability of the empirical evidence that the authors present. Instead, this brief Response will highlight the basic policy choice that the authors ask the Delaware courts to enshrine in the common law of corporations. The question the authors ask us to decide affirmatively is fundamental: Can control of the corporation be sold over the objections of a disinterested board that believes in good faith that the sale is inadvisable? That is, at bottom, the authors want to force the hand of the Delaware courts to decide, once and for all, that impartial and well-intentioned directors do not have the fiduciary authority to just say no for an indefinite-even perpetual-period to a noncoercive tender offer made to their company's shareholders. Although staggered boards are critical to their proposal, the authors prescribe a judicial cure for a quite different toxin: the poison pill.2 Thus, the