Document Type

Article

Publication Date

2009

Abstract

Special committees make some of the most important decisions facing corporations. High-quality decision-making on these critical issues has become even more urgent in this time of economic volatility and outrage about corporate irresponsibility. Indeed, special committees may be increasingly in the spotlight as the current economic crisis will likely lead to a flood of shareholder litigation and, when credit markets thaw, a wave of strategic transactions. Sometimes a board will create a special committee of just one person to handle a crucial matter. This Article proposes that courts or legislatures firmly establish a preference or requirement that special committees consist of more than one member. In support of this proposal, the Article examines research that shows groups tend to make better decisions than individuals. Negotiation theory further bolsters a preference for group decision-making. In addition, this Article integrates recent Delaware case law in which the court has recognized the advantages of having multiple members on special committees.

Keywords

Corporation law, governance, boards, directors, decisionmaking

Publication Citation

9 U.C. Davis Bus. L.J. 137 (2008-2009)

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