Shareholder Derivative Action and Corporate Identity in Delaware Jurisprudence
What is a corporation? What is its identity and interests? Does the legal recognition of a corporate identity as a juridical subject undermine the standing of personal identity? If so, how? These questions are fundamentally semiotic in nature. The identity of a corporation is a sign in use, the meaning of which is contingent upon the language, context and interpreters. It may signify the power of the state, or the nexus of contracts. It may signify an independent subjectivity or a collection of dependent rights. A corporation, however, is ultimately a creation of law, and law will function as the ultimate discourse establishing the power and efficacy of the corporation.
Focus is on the process by which law interprets corporate identity through a shareholder derivative action. The shareholder derivative action is a (legal) method by which the law allows the shareholders of a corporation to compel the corporation to initiate a suit without the consent of (and usually against) its management.
A prevailing metaphor for the corporation is that it is a “nexus of contracts.” These mostly include ownership agreements (e.g., sales of stock and assets), agency agreements (e.g., the establishment of management), labor agreements (e.g., employment rights), and financial agreements (e.g., lines of credit and debt). Yet, only one set of contracts is viewed as constituting the voice of the corporation: the agreement between shareholders and management. Only management through direct action and shareholders through derivative action will ever be recognized by the law as speaking with the corporate voice. Thus, the law restricts the corporation as a subject-representative of the collective subjectivities of its owners and managers and casts the interests of all others as external to the identity of the corporation.