Corporate Governance

Delaware's Top Five Worst Shareholder Decisions for 2009 (#1): The Delaware Courts and the Utter Lack of Diversity

By J. Robert Brown

There is a problem of diversity in the board room.  There are few women CEOs.  Only slightly more than 10% of the directors are women or people of color.  This compares with countries like Norway that have legislatively commanded companies to increase gender representation on their boards to at least 40% (a change that appears to be working). 

The lack of diversity is harmful.  It ensures that boards will be filled with persons coming from similar backgrounds with similar views.  It deprives CEOs of a wider range of views that could improve the effectiveness of decisionmaking.  

A similar lack of diversity exists within the Delaware courts.  The judges on the Supreme Court and Chancery Court have almost identical backgrounds.  There is only one woman.  There are no people of color.  Most come from defense oriented law firms.  In other words, when they address corporate governance legal issues, there is little that would suggest a diversity of views or considerations. 

Nor does there seem to be much impetus to change.  This year a Chancery Court judge resigned.  The pool of applicants seeking the position consisted mostly of lawyers with similar backgrounds.  There were no people of color and only one woman.  The prize, as it always does, went to a Caucasian male with a mostly defense oriented background.

Diversity on the court might well result in judges with a broader viewpoint.  Like diversity in the boardroom, diversity on the court might improve the decision making process.  This in turn would enhance the credibility of the court on matters of corporate governance and perhaps slow the rapid pace of federal preemption.

When asked about changes in the legal profession and the lawyers practicing before the Delaware courts, Chief Justice of the Delaware Supreme Court explained that:  "The Bar is much more diverse than it was in 1970 or even in 1990 and it is becoming increasingly so, which is a positive factor."  Perhaps that diverse bar will one day have a diverse court to consider its views. 

Full post as published by The Race to the Bottom on January 07, 2010 (boomark / email).