One of the striking things about having gotten to know some Australian, New Zealand, and Canadian corporate law professors is the extent to which they are all comparativists. The New Zealand and Australian folks, for example, can rattle off UK cases and statutes as though they were practicing in London.
In contrast, most US corporate law professors I know--and I'm including myself at the head (or bottom, depending on your perspective) of the list--know very little comparative law. Maybe it's chauvinism and maybe it's the sheer volume of law the US produces.
This has an unfortunate effect on our (my) scholarship, in that we fail to consider that what is optimal in the US may not be optimal elsewhere. Consider, for example, my article The Business Judgment Rule as Abstention Doctrine (July 29, 2003). It builds what I think (if I may so myself who shouldn't) a pretty compelling case that the business judgment rule makes sense for Delaware public corporations, without worrying about whether the rule makes sense elsewhere.
Which leads me to a very interesting new article, Aurelio Gurrea-Martínez, The Law and Economics of the Business Judgment Rule: Notes for Its Implementation in Non-US Jurisdictions (January 23, 2016). Available at SSRN: http://ssrn.com/abstract=2720814:
Many jurisdictions have implemented, or are planning to implement, the business judgment rule as a way to improve their corporate governance practices. However, this paper argues that the implementation of the business judgment rule in many non-US jurisdictions may actually exacerbate, under some circumstances, the misalignment of incentives between managers and shareholders. Indeed, the business judgment rule, as it has been traditionally understood, seems to assume that (i) the main role of the corporation is to maximize the value of the firm; and (ii) shareholders are risk neutral and therefore they do not want their managers to be risk averse. However, these assumptions might not work in many jurisdictions outside the Unites States and even in many US corporations. Likewise, many corporations may require, depending on their stage or their type of business, a more or less risky investment strategy. Therefore, the application of the business judgment rule may encourage directors to bear a level of risk that, in some circumstances, may not be desired by the shareholders. Moreover, directors in many jurisdictions are not subject to a credible threat of being sued for a potential breach of the duty of care. Therefore, since there is not enforcement of the duty of care, the implementation of the business judgment rule (either as a statutory or a non-statutory rule) may encourage the directors to ‘over-request’ expert opinions in order to make sure they will be fully protected from a potential – though likely non-existent – lawsuit. On the basis of this exercise, we draw conclusions about the most efficient way to implement (if so) the business judgment rule across jurisdictions, taking into account the divergences in corporate ownership structures, the level of enforcement of the duty of care, and the main role of a corporation in several jurisdictions.
I found it very helpful and recommend it (even though he misspelled my first name). If 33 pages seems daunting, however, you may want to read his blog post summarizing the argument here.
The bottom line is that US lawyers and law scholars should not assume that what works for Delaware public corporations would work anywhere else.
