Hastings Business Law Journal


The author challenges the view among corporate law scholars that state legislatures should enact menus of predefined statutory rules from which corporations may select the governance terms of their choice. The private sector has produced menus of contract terms, such as standard form contracts and model documents, long before the idea of statutory menus became fashionable. There is no evidence that the market for private menus has failed, and legislatures are unlikely to be efficient menu producers. Advocates of statutory menus have suggested a number of rationales, most notably considerations based on transaction costs, network and learning effects, bounded attention, or endogenous preferences. But at closer look, none of these justifications are plausible because, if nothing else, they equally apply to private menus. The existing statutory menus do, however, clarify that certain governance terms are legal in cases where this would otherwise be uncertain. Yet that uncertainty could be reduced by other legislative means than menus. For these reasons, menu production should be left to the private sector.