Title: Process as currency with the courts: judicial scrutiny of directors' decisions

Authors: Jonathan Macey, Geoffrey Miller

Addresses: Corporate Finance and Securities Law, Yale Law School, P.O. Box 208215, New Haven, CT 06520-8215, USA. ' Center for the Study of Central Banks and Financial Institutions, NYU Law School, 10021 New York, USA

Abstract: A critical issue in corporate governance around the world is how much deference should be allocated to boards of directors and management. This paper addresses this question from a positive normative perspective and concludes that the amount of deference accorded to corporate decisions (and to decisions made in other contexts) is a function of the amount of process that boards and managers have used in arriving at such decisions. Courts and legislatures defer to decisions by corporate boards of directors when those boards have constructed and utilised a procedural infrastructure for their decision making that courts deem satisfactory.

Keywords: corporate governance; corporate finance; deference; boards of directors; judicial review; administrative law; corporate decisions; decision making; procedural infrastructure.

DOI: 10.1504/IJCG.2009.032724

International Journal of Corporate Governance, 2009 Vol.1 No.4, pp.337 - 365

Published online: 18 Apr 2010 *

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