2008 • Volume 33 • Number 3

Overturn Time-Warner Three Different Ways

Joel Edan Friedlander

The Paramount Communications, Inc. v. Time Inc. (Time-Warner) decision and its reasoning exemplify a modem trend in corporate governance affording boards of directors unilateral power to transform a corporation. This article proposes three statutory limits on the current permissive model of corporate governance. The first proposal is a statutory standard of fiduciary duty specifying that a director’s duty in deciding whether or not to oppose a purchase of corporate control is to act reasonably and in good faith to maximize the company’s value and its investors’ returns. The second proposal would allow stockholders to set the terms by which they can sell their shares, by allowing bylaws to restrict a poison pill’s use or duration. The third proposal would require majority stockholder consent to any corporation transforming action initiated by a board of directors, such as Time’s acquisition of Warner. These three proposals would each check the unilateral power boards currently enjoy in transforming a corporation or blocking a purchase of corporate control.