William Bratton Delivers The Ruby R. Vale Distinguished Scholar Lecture
Web Editor - Published: March 19, 2011
“I have no ideological preference for Delaware corporate law, I just think that it developed in a competitive environment and should be given the benefit of the doubt,” said University of Pennsylvania School of Law Professor William Bratton as he delivered the 2011 Ruby R. Vale Distinguished Scholar Lecture, entitled “The Case Against Shareholder Empowerment (and In Favor of Delaware Law).”

The lecture, delivered on Friday, March 18th, came as part of the 23rd annual Ruby R. Vale Interschool Corporate Moot Court Competition. Professor Bratton’s remarks followed a welcome from Widener Law Vice Dean J. Patrick Kelly and an introduction from Associate Professor Paul L. Regan, the Acting Director of the Institute of Delaware Corporate and Business Law.

Bratton’s lecture focused on examining whether arguments for empowering the shareholders of public companies and reducing management power would actually serve to improve the governance of publicly traded companies. Bratton indicated that those in favor of shareholder empowerment operated from the premise that “Management power presents an economic and social problem” and that “Management power is power wielded without responsibility.”

Breaking down the assumptions of shareholder empowerment advocates left Professor Bratton convinced that the arguments were wrong, however, and that the idea that shareholders have “a pure incentive to maximize value,” missed the fact that shareholders are looking for short-term returns rather than after the long-term health of the company. “A pure financial motive perhaps, but not necessarily a wholesome one,” he concluded.

Looking at the recent fiscal crisis, Bratton made the case that attempts to maximize shareholder value served as a one of the major component causes of the global financial crisis. He pointed out that more conservatively managed companies faired better than most of the companies that had taken risky approaches to maximize value on the stock market. Instead of shareholder empowerment, Bratton advocated for the need “to uncouple management incentives from short-term shareholder value.”

William Bratton is the co-director of the Institute for Law and Economics at the University of Pennsylvania Law School. He graduated from Columbia University, where he also earned his J.D. A recognized scholar on business law topics, Bratton is a research associate of the European Corporate Governance Institute and in 2009 was installed as the Anton Philips Professor at the Faculty of Law of Tilburg University in The Netherlands. He is the author of Corporate Finance: Cases and Materials, and his scholarship has featured in numerous law reviews and journals.