American corporate law has remained remarkably stable for decades. The stakeholder movement of recent years has unleashed extensive discussions about ESG, corporate purpose, diversity, and benefit corporations. Yet change in actual legal rules has been slow to appear. Against that backdrop, the decisions by the Delaware courts in the Williams Companies Stockholder Litigation suggest a significant adaptation. (In re the Williams Cos. S’holder Litig., 2021 WL 754593, (Del. Ch. Feb. 26, 2021) aff’d The Williams Companies, Inc. v. Wolosky, (Del. Nov. 3, 2021)). The Williams decisions reinterpret parts of Unocal Corp. Inc. v. Mesa Petroleum Co., a key case in the current corporate law paradigm. In doing so, they shifted Delaware law as to several key Unocal elements as developed over the last four decades in ways that increase the likelihood of some director governance decisions, such as a poison pill, failing judicial review. The ideological underpinning for this change is not, however, the reasoning of the stakeholder movement, which likewise has sought to alter the exercise of director power. Rather, this shift reflects Delaware’s embrace of technological innovations and market changes, particularly those reshaping the role of shareholders.

This article makes three contributions to understanding this evolution. First, it resets the frame for viewing the current Delaware governance paradigm that arose in response to the tight spot in which corporate management found themselves in the 1980s as hostile takeovers accelerated. Unocal (and two other Delaware decisions shortly thereafter—Revlon and Blasius) are at the core of what was a fundamental change. In those decisions Delaware judges expressed dissatisfaction with the capacity of their traditional frame for judicial review to adequately deal with director decisions in takeovers: “Our corporate law is not static. It must grow and develop in response to, indeed in anticipation of, evolving concepts and needs” the Court said as it inserted a third, enhanced, level of scrutiny between the two existing standards of business judgement deference and entire fairness. The focus in each of these new cases was on giving room for shareholders to check the extensive power that corporate law traditionally has provided to directors. Blasius explicitly sets out the ideological foundation for this change—the shareholder franchise is “critical to the theory that legitimates the exercise of power by some (directors and officers) over vast aggregations of property that they do not own.”

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