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Prof. Fisch challenges use of corporate shareholder agreements as private ordering mechanisms

October 05, 2020

In “Private Ordering and the Role of Shareholder Agreements,” published as an Institute for Law & Economics Research Paper and Law Working Paper of the European Governance Institute, Saul A. Fox Distinguished Professor of Business Law Jill E. Fisch explores the role of shareholder agreements in private ordering, which she explains as “tailoring a firm’s corporate governance to meet its individual needs.” With her pathbreaking paper, Fisch “offers the first broad-based analysis of shareholder agreements, detailing the scope of issues to which they are addressed and identifying the challenges that they pose for corporate governance.”

Fisch notes that courts have largely upheld firm-specific governance provisions “as consistent with the contractual theory of the firm.” Beyond the courtroom, she writes, most commentators, despite finding some governance provisions problematic, “support a private ordering approach as facilitating innovation and enhancing efficiency.”

Shareholder agreements, however, pose particular challenges, Fisch argues. They add complexity and opacity to a firm’s governance structure as well as undermining the predictability provided by corporate law’s traditional governance tools – the charter and bylaws. Further, although shareholder agreements haven’t received much judicial and academic scrutiny, some court opinions suggest “corporate participants have greater latitude to engage in private ordering through a shareholder agreement and even that shareholder agreements can be used to avoid otherwise-mandatory provisions of corporate law.”

Fisch challenges this growing usage of shareholder agreements and “maintains instead that corporations should engage in private ordering through their charter and bylaws.” She maintains that corporate participants should not be able to use shareholder agreements to evade statutory or common law limits on private ordering and argues that, to the extent such limits are undesirable, they should be the subject of legislative reform.”

Fisch is an internationally known scholar whose work focuses on the intersection of business and law, including the role of regulation and litigation in addressing limitations in the disciplinary power of the capital markets. She is a Co-Director of the Institute for Law and Economics and has written more than 85 scholarly articles that have appeared in top law reviews, including the Harvard Law Review, the Yale Law Journal, and the University of Pennsylvania Law Review.

Current projects include experimental research into financial literacy and retail investor decision-making, analysis of the evolving role of institutional investors in corporate governance, and ongoing work on the conception and implementation of corporate purpose.

She received the LLM Award for Excellence in Teaching in 2015-2016 and the Robert A. Gorman Award for Excellence in Teaching in 2010-2011. Fisch is a Director of the European Corporate Governance Institute, a member of the American Law Institute, and a former Chair of the Committee on Corporation Law of the Association of the Bar of the City of New York. She is also a member of the National Adjudicatory Council of the Financial Industry Regulatory Authority.