Abstract
What is a corporation? What is its identity and interests? Does the legal recognition of a corporate identity as a juridical subject undermine the standing of personal identity? If so, how? These questions are fundamentally semiotic in nature. The identity of a corporation is a sign in use, the meaning of which is contingent upon the language, context and interpreters. It may signify the power of the state, or the nexus of contracts. It may signify an independent subjectivity or a collection of dependent rights. A corporation, however, is ultimately a creation of law, and law will function as the ultimate discourse establishing the power and efficacy of the corporation.
Focus is on the process by which law interprets corporate identity through a shareholder derivative action. The shareholder derivative action is a (legal) method by which the law allows the shareholders of a corporation to compel the corporation to initiate a suit without the consent of (and usually against) its management.
A prevailing metaphor for the corporation is that it is a “nexus of contracts.” These mostly include ownership agreements (e.g., sales of stock and assets), agency agreements (e.g., the establishment of management), labor agreements (e.g., employment rights), and financial agreements (e.g., lines of credit and debt). Yet, only one set of contracts is viewed as constituting the voice of the corporation: the agreement between shareholders and management. Only management through direct action and shareholders through derivative action will ever be recognized by the law as speaking with the corporate voice. Thus, the law restricts the corporation as a subject-representative of the collective subjectivities of its owners and managers and casts the interests of all others as external to the identity of the corporation.
Source: GREEN, ALAN C.: “Shareholder Derivative Action And Corporate Identity In Delaware Jurisprudence” Prize winning paper of the Roberta Kevelson Seminar on Law & Semiotics, 2012
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Notes
- 1.
Thomas Hobbes, Leviathan Part. I, ch. 16.
- 2.
Citizens United v. Fed. Election Comm’n, 130 S.Ct. 876, 972 (2010) (Stevens, J, dissenting).
- 3.
See Video, Colbert Super PAC―Stephen’s South Carolina Referendum, http://www.colbertnation.com/the-colbert-report-videos/403807/december-07-2011/colbert-super-pac-stephen-s-south-carolina-referendum. The referendum never saw the light of day, however. The Supreme Court of South Carolina held the law of the state did not permit “nonbinding advisory questions” and ordered the Election Commission not to print any primary ballots containing such referendums: Beaufort County v. S.C. State Election Comm’n, Opinion No. 27069 (S.C. Nov. 22, 2011). As an artificial language, legal discourse most certainly lacks a sense of humor.
- 4.
Lacan, Écrits: A Selection 230f (trans. Alan Sheridan, 1977).
- 5.
Lacan, Some Reflections on the Ego, 34 Int’l J. of Psychoanalysis 11, 12 (1953)
- 6.
Id. at 16.
- 7.
See Julia Kristeva Interviews 26 (Ross M. Guberman ed., 1996).
- 8.
Id. at 12.
- 9.
See generally Paul G. Mahoney, Contract or Concession? An Essay on the History of Corporate Law, 34 Ga. L. Rev. 873 (2000) (exploring the historical development of corporate law as it converges with contract law).
- 10.
Austin v. Michigan Chamber of Commerce, 494 U.S. 652, 658–59 (1990).
- 11.
Easterbrook & Fischel, The Economic Structure of Corporate Law 4, 35–36 (1991).
- 12.
While Delaware law is, by no means, the only law applicable to corporations, it is, by far, the most important in terms of the governance of the modern, large, publicly traded corporation in the United States. More than half of all publicly traded companies in the U.S. are incorporated in Delaware including 63% of the Fortune 500 companies. See About Agency, Del. Dep’t of State, Division of Corporations, http://www.corp.delaware.gov/aboutagency.shtml. Delaware’s position in American corporate law, as it relates to the regulation of large, multi-state companies has long been recognized as “supreme”. See William L. Cary, Federalism and Corporate Law: Reflections on Delaware, 83 Yale L.J. 663 (1974).
- 13.
Del. Code tit. 8, § 122(2).
- 14.
Id. § 141.
- 15.
Id. § 160.
- 16.
5 A.2d 503, 510–11 (Del. Ch. 1939)
- 17.
The internal dynamics initiated by the law through the semiotic process of signifying identities as belonging or not belong to itself will be explored further in Part IV.B below.
- 18.
Roger J. Magnuson, 1 Shareholder Litigation § 9:1 (2004).
- 19.
While the author is unaware of any prior scholarship utilizing this phrase, the semiotic formulation confirms the well-established legal understanding that a derivative action is, at its inception, a dispute between shareholders and management. See Id. (“The derivative action [is] an equitable suit by which an oppressed minority shareholder assumes the mantle of the corporation itself to right wrongs committed by those temporarily in control of the corporation’s destiny.”).
- 20.
845 A.2d 1031, 1035 (Del. 2004).
- 21.
Id. at 1036 (emphasis added).
- 22.
Bokat v. Getty Oil Co., 262 A.2d 246, 249 (Del. 1970).
- 23.
Tooley, 845 A.2d at 1038.
- 24.
This reluctance is evidenced by numerous cases in which plaintiff/shareholders have crafted intricate arguments intended signify the action as direct rather than derivative. See, e.g., Id., at 1034; Feldman v. Cutala, 951 A.2d 727, 732–33 (Del. 2008). To the author’s knowledge, in no case in which the nature of the action is at issue has the shareholder interpreted the case as a derivative action.
- 25.
The protections afforded management in shareholder derivative suits (namely, the demand requirement), and the meaning thereof as it relates to corporate identity will be discussed infra Part III.B.
- 26.
In re J.P. Morgan Chase & Co. Shareholder Litigation, 906 A.2d 808 (Del. Ch. 2005)
- 27.
Id., at 818.
- 28.
Id., at 819.
- 29.
Agostino v. Hicks, 845 A.2d 1110, 1119 (Del. Ch. 2004); Avacus Partners, L.P. v. Brian, 1990 WL 161909, at *6 (Del. Ch. 1990); In re Paxson Communications Corp. S’holders Litig., 2001 WL 812028, at *5 (Del. Ch. 2001).
- 30.
See J.P. Morgan, 906 A.2d at 818 (“Any alleged dilution was a harm suffered by all pre-merger [J.P. Morgan] stockholders and, consequently, [J.P. Morgan] itself.”).
- 31.
Roberta Kevelson, Property as Rhetoric in Law, 4 Cardozo Studies in Law & Literature 189, 197 (1992)
- 32.
Larry Catá Backer, The Corporation as Semiosis, 135 (Consortium for Peace & Ethics Working Paper No. 2012–2, 2012).
- 33.
Del. Ch. Ct. Rule 23.1.
- 34.
Aronson v. Lewis, 473 A.2d 805, 814 (Del. 1984).
- 35.
J.P. Morgan, 906 A.2d at 821.
- 36.
J.P. Morgan, 906 A.2d at 821 (quoting Aronson, 472 A.2d at 812, 816).
- 37.
Backer, supra note 32, at 133.
- 38.
eBay Domestic Holdings, Inc. v. Newark, 16 A.3d 1, 34 (Del. Ch. 2010).
- 39.
Lacan, supra note 4.
- 40.
See Backer, supra note 32, at 102–03, n.5.
- 41.
Christopher Stone, Where the Law Ends 97 (1975).
- 42.
Kevelson, supra note 31, at 197.
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Green, A.C. (2015). Shareholder Derivative Action and Corporate Identity in Delaware Jurisprudence. In: Broekman, J., Catá Backer, L. (eds) Signs In Law - A Source Book. Springer, Cham. https://doi.org/10.1007/978-3-319-09837-1_33
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