Back to Basics: Delaware’s Genius of Simplicity

Adapted from Remarks at the Journal of Corporation Law’s 51st Annual Symposium

Delaware corporate law has endured for decades because of its simplicity.  In a recent keynote address at the Journal of Corporation Law’s annual symposium, I reflected on why, amid intensifying governance debates, we cannot lose our bearings.  We must resist the intellectual gravity that pulls us toward complexity and invites us to mistake it for rigor.

Delaware’s strength lies not in creating elaborate doctrine, but in maintaining a stable structure that empowers directors to lead, enables investors to rely on durable standards, and guides courts to remain faithful to their institutional role.  It is time to recenter on those enduring first principles.

The Fiduciary Promise

The fiduciary relationship is the centerpiece of Delaware law.  When stockholders invest in a corporation, they entrust their property to the stewardship of its directors and officers.  In return, those fiduciaries make a simple, powerful promise to be loyal and careful.  Loyalty demands an undivided allegiance to the corporation and its stockholders.  Care requires an informed and engaged process—not a guarantee of results.

We do not expect directors to be infallible.  Nor do we hold them liable when well-intentioned decisions go wrong.  We ask—and presume—that they engage, deliberate, and exercise independent, good-faith judgment.

These duties point managers toward a clear purpose: promoting the corporation’s long-term value for its stockholders.  That clarity of purpose is not a limitation.  It ensures predictability, renders performance measurable, and makes duties enforceable.

The Business Judgment Rule

If the fiduciary promise is the foundation of our law, the business judgment rule is the load-bearing wall that allows the structure to stand.  It is not a safe harbor for carelessness but makes the fiduciary promise practicable.

Business decisions involve risk, and some failure is inevitable.  Without a strong business judgment rule, every setback would invite hindsight litigation and push courts to second-guess decisions they are ill-equipped to evaluate.  The result would be boardrooms populated by timid managers, fearful of taking on a bet-the-company merger or pursuing a novel product that may never come to market.

At its essence, the business judgment rule is an act of judicial humility.  It recognizes that directors—not judges—have the knowledge and expertise to make strategic choices.  It limits the judicial inquiry to loyalty and process, reserving space for the innovation that fuels long-term value.  This deference is not abdication.  It is discipline and restraint.

Creeping Complexity

Despite these virtues, our law faces growing pressure.  At a time when duties have become more diffuse and directors are expected to balance an array of interests, doctrinal certainty has eroded. Independence and control standards have drifted toward amorphous, hindsight-driven inquiries. Oversight theories are raised in ways that blur the line between external misfortune and fiduciary wrongdoing.

These trends create ambiguity and fuel litigation friction.  The barrier for meritless claims is lowered.  More frivolous lawsuits are filed.  Judicial resources are strained.  And settlement becomes a rational economic decision rather than a reflection of merit—a system that rewards rent-seeking over justice.  The damage extends beyond the courtroom, chilling the innovation and risk-taking that drive economic growth.

The Equitable Safeguard

Equity, coupled with bright-line rules, provides an answer.  Equity is the conscience of our corporate law.  It is a distinctive, essential feature that ensures the protections of our law do not become a shield for the unprincipled.

Equity polices actors, not outcomes.  It allows our courts to look past technical compliance to address disloyalty or bad faith.  It provides a solution to modern complexity by addressing true wrongdoing by the few so that rules can remain straightforward and efficient for the many.

But equity is not a license for a judge to impose her own moral code or policy views.  It is the reciprocal partner of the business judgment rule.  One protects managerial discretion; the other prevents opportunism.  We can afford deference because we retain the equitable power to enforce the fiduciary promise.

Our Commitment

Times of turbulence clarify.  They remind us that our system is anchored in principles, not personalities or trends.  The path forward does not lie in more intricate doctrine, but in reaffirming Delaware’s basic paradigm: predictable fiduciary guidelines, a robust business judgment rule, and the disciplined use of equity.

Delaware judges are guardians of process—not business managers, strategists, or policymakers. Our legitimacy depends on neutrality, restraint, and clarity.  And the stability of our corporate governance system requires our collective willingness—judges, practitioners, and scholars alike—to preserve these first principles.  Renewing that commitment is critical as we navigate an increasingly demanding future.

The full article is available here.