Pills, Polls and Professors: a Reply to Professor Gilson

PILLS, POLLS AND PROFESSORS: A REPLY TO PROFESSOR GILSON A WORKING PAPER BY MARTIN LIPTON AND PAUL K. ROWE*

ABSTRACT In the fifteen years since Unocal Corp. v. Mesa Petroleum Co., the Delaware courts have developed a comprehensive legal framework for corporate control contests that has led to predictability in corporate governance and furthered the fundamental values of corporation law. Academic criticism of the Delaware model persists, however, reflecting continuing adherence to the efficient market hypothesis and, more broadly, an unexplained academic preference for market transactions over elections as the means of resolving control contests. A recent example of such criticism, exemplified by Professor Gilson's "Unocal Fifteen Years Later (And What We Can Do About It)," advocates reversing the course of Delaware takeover law since 1985, and particularly urges the validation of shareholder bylaws that dismantle a "poison pill." This article defends the key choices of the post-Unocal regime of Delaware law. The article first reviews the events that gave birth to the Delaware framework, then summarizes recent attacks on the Delaware model, and finally demonstrates the jurisprudential and practical deficiencies of the criticism. As the article shows, the academic critics propose abandonment of a tested and successful balance notwithstanding the complete absence of evidence indicating that the Unocal compromise has harmed corporate governance, damaged shareholder welfare, or impeded economically desirable transactions. The article concludes that there is no reason to depart from the well-reasoned and well-understood Unocal rules.

Mr. Lipton and Mr. Rowe are partners at Wachtell, Lipton, Rosen & Katz. The authors' colleagues William Savitt and Erin Quinn made major contributions to this article.

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DELAWARE JOURNAL OF CORPORATE LAW

[Vol. 27

Fifteen years ago, the Delaware courts crafted a comprehensive and sensible legal structure governing...