3 - Private Litigation

Summary

How does corporate law work? This question has puzzled corporate legal scholarship for decades. The puzzle stems from the apparent lack of legal sanctions. Corporate decision makers practically never pay out of pocket for their misbehavior, so presumably the law lacks teeth. An influential strand of the literature suggested that corporate law’s teeth consist in facilitating nonlegal sanctions. But so far the existing accounts have failed to develop a satisfactory theory of how nonlegal forces work or how exactly the law facilitates them.