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The Basic Partial Solutions: Basic Corporate Law
U.S. corporate law offers two basic solutions to the corporate agency problem: shareholder voting, and fiduciary duties enforced by shareholder lawsuits. Here we offer a first tour d’horizon of these and other basic building blocks of corporate law, before delving into them in much more detail later in the book.
Even in this brief tour, you will see that U.S. corporate law generally sets only default rules. Charter provisions and other contractual or quasi-contractual arrangements can supplement or alter all or most of these rules. Indeed, “contractual” arrangements pervade corporate law, from the definition of shareholder rights and allocation of management power in the corporate charter, to bylaws on voting, to executive compensation contracts. Read: DGCL 102(b)(1), 151(a), 141(a), 242(a), 242(b)(1) and 109.
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