An interview with Chief Justice Myron Steele of the Delaware Supreme Court

He served on the Delaware Superior Court from 1988 to 1994, and held the position of vice-chancellor of the Chancery Court of Delaware for six years before being selected for the Supreme Court bench in 2000, where he served as a justice. In September he was in London for the ABA Global Forum on Delaware Law. Speaking with Ellisa Habbart of The Delaware Counsel Group LLP, who features in The International Who’s Who of Corporate Governance Lawyers 2011, he gives Who’s Who Legal an insight into his career and shares his views on the governance issues affecting the US and Delaware.

With a BA in foreign affairs, the law does not seem an obvious choice, so how did you find yourself in this profession and did you consider a career in international law?

As you noted, I did take my first degree in foreign affairs. My sub-specialty was the Middle East. I was originally interested in the United States Foreign Service, and it struck me that a law degree would be helpful in the Foreign Service arena. But once I got to law school I can’t say I enjoyed it – that’s probably not the right way to phrase it – but I got caught up in it, and I decided that I’d rather be a litigator. So I gave up the idea of the Foreign Service, although I did take a number of international law courses.

So what was it about litigation that really appealed to you?

The fact that you could be approached by someone that needed your help, and often in desperate straits, and out of all the possible choices they had they would come to you, and then it would become your professional responsibility to do the very best you could for them. I just liked the idea of standing up for people and being able to present their cause.

Was there a particular part of litigation that you decided to specialise in, or that you found you were doing more work in?

I started out in practice as a general litigator. I liked that because it gave me an opportunity to learn facts and processes that related to a number of industries and individual issues. I eventually gravitated more towards what you might call health-care law for a period of time, but I also did insurance defence work and equity litigation.

You worked as a litigation partner at Prickett Jones & Elliott for 18 years. How did that come about?

They recruited me from law school. Then they loaned me to the attorney general’s office. The Delaware culture at the time, before we had an attorney general’s office populated by tenured professionals, was for major law firms to lend their young associates — lend in the sense that they didn’t pay our salaries, left the firm, but was expected to return. In the UK you might say ‘seconded’ to the attorney general’s office. That was good for me and good for the firm because it gave me an opportunity to do more jury trials more quickly than I would ever have had an opportunity to do.

You served in the US Army and later the National Guard. How did your military career impact your decision t­o be a litigator? What skills could you transfer?

The military was never a real option for me. My father was an army officer and someone in my family has been in the army for as long as we could document. It was just naturally expected that I would find a way to serve. It was at the time of mandatory service – as well. My option was either be drafted or go in as an officer. My father preferred that I go in as an officer, but I took my law degree first. I ended up during the Vietnam era going to Fort Benning in Georgia, and getting trained as an infantry officer. But when they found out I had a law degree, instead of sending me to Vietnam they kept me at Fort Benning to do court martials. It made sense.

What was it like there?

It was a mess, a terrible mess because there was so much opposition to the war, even in the military itself. People were purposefully getting in trouble to avoid going to Vietnam. It was a difficult time.

Turning to your judicial career, when did you decide to become a judge and why did you decide to apply?

If I had had a choice, I would have probably practised for another 10 years before I tried to go on the bench. The way the system works in Delaware is that judges have 12-year terms, and an opening doesn’t come up at your convenience. It is also geographically and politically balanced, so you have to find a seat that comes up that suits your politics, your region and suits the nature of your practice. So I went on when I was 43 but I would rather have entered in my early fifties. But if I didn’t do it when I did someone else would have gotten that 12-year seat, and maybe sought reappointment. It wouldn’t have been available to me. It was fortuitous in a sense.

You served on the Superior Court for six years and the Court of Chancery for six years. In your experience what makes a good judge?

Patience with everything, consideration of other people and a good work ethic. If I were to be graded on a report card I would probably get a “C-” for patience. I hope I would get an “A” for work ethic. The expression ‘sober as a judge’ does not mean not drinking, it just means a sober kind of approach. Of course, intellect helps.

In 2005 you completed an LLM. What made you return to academic study at this stage in your career?

The course work was done in the summer of 2003 and 2004 and the thesis was delayed until 2005 because at the same time I was in effect working to become Chief Justice – only so many extracurricular activities could be undertaken. I thought going back to school, so long as I could keep my work up, would be intellectually reinvigorating. If you do the same thing for a long period of time, you get stale. I was lucky that I had the AG office, I had the practice of law, which was very varied, my Superior Court work for six years, Chancery for six years, and I had been at the Supreme Court for three years, and the opportunity came up. I said, well this cannot be missed: I needed to do this to keep my mind moving and keep it fluid and keep my interest in legal theory – not just processing cases.

So how did you find going back to academia?

Well at the time my alma mater (University of Virginia) was where the degree was being offered and it was subsidised by the State Justice Institute, which provides training for appellate, federal and state judges to keep them abreast of issues in the law beyond what they do every day. I had met other people who had done it and they told me how invaluable they thought it was and how stimulating it was and I thought, "If I don’t do it now, I’ll never do it." I loved it. I got to meet people from all over the country, all different backgrounds and have stayed friends with a number of them. It was a terrific experience.

How would you sum up your overall role as Chief Justice of the Delaware Supreme Court?

It is a multi-layered, multi-structured role. The Constitution of the State says the Chief Justice is the administrative head of the court system; so with that comes personnel issues, budgeting issues, relationships with the legislative and the executive branch. It also means you’re the public face of the legal community and the court system. The fact that I am here suggests there is an outreach, almost a marketing element into convincing people that Delaware is the place to do business, it’s the place to litigate, to register your corporation, so you’re in effect a sales person, to some degree. I am president-elect of the Congress of Chief Justices, which is an assembly of all the chief justices of DC, the states, the territories and the associated states, as far as Puerto Rico to Guam and everything in between, so I’ve got that kind of role to play. And then there’s the obvious court work, the core business.

What do you find most fulfilling about your role?

I like working with my law clerks, I like oral argument and I like writing opinions, the basic core work.

In terms of the relationship with your justices, do you relish the debates and different perspectives?

I am very lucky, when I hear stories from around the country about the relationships that people on the various high courts in the state have. We have the five of us, we all know each other, it is not as if we come from miles away. I have grown up in the practice with them, they are very collegial, and there is no question about their strong work ethic and good intellect. We debate issues but it’s never a hard debate in the sense that it’s acrimonious, and we do not write opinions where we differ in various sections, and snap at each other every once in a while. It does not happen in our environment. We keep each other intellectually honest. It makes it a delightful situation when you have four colleagues that you can genuinely call colleagues and not just because they have a job similar to yours and you have to work with them. It is a pleasure working with them.

What are the most challenging aspects of the job?

Keeping up-to-date with the law, knowing all I think I should know. You do not want to ever miss something; you do not want to appear that you do not get the issue. So keeping up-to-date and listening to other people and learning from them – that is why I like these kinds of meetings because I can see what is going on in the world, and I don’t have a sense of isolation. I do not work in a monastery! Interaction through the ABA and IBA and other institutions, and teaching at three law schools keeps me involved with students and forces me to keep up to date with the corporate governance arena because that is what I teach.

How has corporate litigation and governance changed since you began practising over 40 years ago?

It’s a significant question, because I think it has changed more since 2002 than in any other decade. We did have a significant decade in the ’80s when the takeover business hit its full stride and there was much intellectual debate and litigation that shaped the process for the acquisition business in publicly traded corporations. That was a significant decade. Fiduciary duty law began to be shaped by facts in individual cases to a sharper and more nuanced degree than ever before. Now, this decade has been a phenomenon of a different balance between the authority the board and the board’s accountability to the shareholders. Some people characterise it as the shareholder rights movement, the rise of the importance of the institutional investor as opposed to the individual investor. By institutional investor, I really mean the activist investor – often union pension funds, public employee pension funds, etc. So the debate of the last five to 10 years over perhaps reshaping the relationships between shareholders and the authority of the board is a very significant focus of keeping the right balance between the groups in order to improve performance. Too often, I think the arguments could be phrased as: "We want power," almost as if we should have it as a matter of right, when I think the focus should be: "How do we make adjustments that promote performance that result in not only a better investment for individual or institutional shareholders in a company but that strengthens the market overall?" The focus is not on who can shout the loudest or who has the right answer, but on working to get better performance. Society benefits from the wealth that the corporate world brings to the community.

In your opinion, which is the better check on decision-making, director conduct and risk management within a company, shareholder activism or director power?

My view accords with Delaware’s corporate governance scheme, which recognises that it is the board of directors who manage the corporation and shapes the strategy. That works well if the directors are wise enough, have a transparent process and communicate well with their shareholders. Now, if you get a "my way or the high way" kind of attitude from the board and they do not communicate, it is not going to enhance performance. The ultimate authority has to be with the board, and we carve out areas where shareholder action is required for an event to take place, like amending the charter, or something significant like that. So there is a shared responsibility, but you have to carefully carve out those niches where it makes sense for shareholders to be involved and work out where there is a mutual benefit in a respectful and enlightened way. That way I think you’ll enhance the governance system to always focus on improving performance.

In your view, should there be a limit to ethical responsibility imposed on boards and in agreements, through law and regulation?

I think there is a corporate responsibility that is owed to society generally and owed to communities in particular. What we focus on in Delaware is whether directors have breached their fiduciary duties, the duty owed to the shareholders and corporation. We will not impose a duty on them to ‘green’ the world or respect the rights of labour unions beyond their contract rights, or suppliers in the community. On the other hand, whenever they factor ostensibly irrelevant constituencies into their decision-making, we say that is fine if the consideration rationally relates any decision to a benefit to the corporation as well. If so, you will not breach your fiduciary duty simply by considering it, even if it does not directly enhance shareholder value. That is the way we handle that tension. There are other states – Oregon comes to mind – where a statute imposes consideration of the environment. There are others, like Pennsylvania, which we refer to as constituent states because they require, as part of the corporate process, consideration of the impact on their workers, their suppliers, their distributors, their local school districts, and their community. We in Delaware say it is fine to consider those issues, as long as there is a rational basis and as long as you keep your eye on the real ball, which is taking care of the people to whom you owe the responsibility – your investors and the corporation. We do not sanction directors who consider societal interests where there are circumstances that benefit the corporate entity to do so.

Do you think there could ever be a time in Delaware when consideration shifts into a requirement? Could it a useful pursuit?

No. I don’t believe in rule-based demands. An examination of corporate conduct should be contextual, there has to be flexibility in decision-making. So long as directors don’t make it in their interest and don’t ignore their responsibility by being careless or reckless in the way in which they exercise their authority. I don’t think we build wealth in the right way irrationally by distracting them from the core business.

What are the biggest challenges facing the Delaware judiciary in the next five years?

The first is keeping in balance the concept of the extent to which shareholders and directors mutually operate in the corporate governance structure. We need to make sure we still get that right. We have to watch the role of institutional investors and proxy advisers. In an era now where they own or affect votes of an overwhelming majority of stock, we have to ensure protection of the entire shareholder base. Institutional investors are often short-term investors; their interests are not the same as long-term investors. The couple who worked at the plant for 30 years and started investing in shares are interested in retiring one day with those shares’ value enhanced at least enough to sustain them. Institutional investors have their eye on the quarterly bottom line and have to convince their board of managers that they have invested wisely and profited at the end of the quarter. We have to recognise that their interests are not necessarily the same. The only entity capable of balancing all these varied interests is the shareholder elected board. It is a republican democracy. We cannot have the shareholders call premier shots, but we have to protect their voting franchise and make sure the board doesn’t entrench itself or lose focus on the success of the company for political or other reasons. We must protect the shareholders right to remove them if they are performing badly, their right to sue them when they’re performing badly, the right to restructure the arrangement by adopting by-laws or amending the charter. We protect their voting rights absolutely but they cannot direct the affairs of the corporation because they’re not a monolithic body.

The UK Bribery Act and the US Foreign Corrupt Practices Act (FCPA) have the same objective but significantly differ in their definitions of bribery, their scope of application and penalties. Is there an argument for harmonising the two laws to better achieve the aim, particularly as companies have increasingly global operations?

A major caveat; the FCPA is a federal law which has nothing to do with me; my role is the internal governance of the Delaware corporation. I am not familiar with the UK bribery act but I believe that what both those statutes are trying to do is prescribe a norm of behaviour that most people would generally wish to follow. At the state level, if shareholders learn that the board or management engaged in acts that would constitute a violation of accepted norms of behaviour then they can bring suit against them for breach of fiduciary duty and or remove them from office. That is a mechanism that works. Those are examples of producing norms and principles that are aspirational and mandated (because they are criminal acts) but in terms of corporate governance those norms should be scrupulously followed. The states would set a fiduciary duty norm that would be policed in the state courts.

You have taught at Pennsylvania School of Law and teach at the University of Virginia and Pepperdine Law schools. In terms of the future, what advice would you give to students who wish to enter the governance field, and perhaps have aspirations for judicial service later in their lives?

I would say get the correct training, either as a litigator or a transaction lawyer. The worst thing that can happen is for someone to sit on the bench who has no understanding of the law they are going to be applying. The bench is not a good place for on-the-job training. So, if you do believe you would like to sit on chancery or any equity, business court, or on a commercial court, practise law in that area: enhance your knowledge and your on-the-job knowledge. That way you will learn how you think things ought to work as you’ll see where they’ve gone wrong, and you’ll get a much better feel, if you want to become a judge, of how to correct errant law.

If you could be granted one wish to make your job easier what would it be?

….My wish list is so long, I’m trying to grope for number one as opposed to my top ten! I wish there could be ways of enhancing public respect for the law and the judicial system. I would stress to the public that we genuinely stand for equal access and that justice is not just a word. Everyone has a stake in the system working, and working well, and perception can be as important as reality when it comes to changing the ultimate goal of justice across the board. It is not just the role of corporate governance that I have to deal with in my job and, as a result, I sometimes worry about the public’s respect for and understanding of the difficulties the legal system faces. In Delaware, the people that work within the legal system care so much about getting it right and it hurts me when the press publicise something that is wrong because there were mistakes made or there is something that can be construed to be an injustice - that’s the wrong focus. People don’t see how everyone works every day to try and provide an environment where people who are in the system as litigants, in any capacity, walk out the courthouse door feeling that the best that possibility could have been done was done. If in some way my career has brought us closer to that goal I would be satisfied.

The history of corporate governance demonstrates that Delaware is one of, if not the, most experienced and knowledgeable court ruling in this area of law. What makes Delaware such an attractive jurisdiction for developing corporate jurisprudence?

I’ll give you four reasons. Firstly, our general corporation law is the model act in the US. It is a flexible act that allows for, not an unfettered operation without controls, but for rational, contextually based controls where there is a rational balance of authority and accountability between the board and shareholders. People like the fact that because there is not a ‘one size fits all’ framework (which is the danger of a Napoleonic code) like Sarbanes-Oxley or Dodd-Frank. Secondly, we have a court system with specialised judges: five on the Chancery Court, five on the Supreme Court. Lawyers and litigants know that if they have a dispute to be resolved in Delaware, we have the experience in this area to deal with it. People like that. Also we’ve built up in the last 100 years case law like no another jurisdiction because we don’t have jury fact finding and our cases are resolved by judges who make findings of fact and articulate the principles of law and the doctrines that apply and explain how, after applying them, they reach rational conclusions. That builds the law in the great common law tradition and can be relied on for predictability. The fact we have a body of corporate decision-making like no other state makes us attractive. Thirdly, there are empirical studies that show the performance of Delaware corporations in the world stock exchanges outperform other corporations. I am not going to suggest that is always the case, but the empirical data have been tracked over the years. We like to think the corporate governance structure that we monitor helps make that happen. Fourthly, we have a good relationship with our legislature; we don’t have a populist legislature that changes the law in the corporate or alternative business world to suit the flavour of the month in politics. They listen, they are thoughtful, they work with the court system and the bar, so we have a good working relationship between all three branches of government, and little dissension. One can’t say that about every state system around the country.

If you were not a lawyer and judge what would you be?

I probably would have tried the Foreign Service, and if that had been unsuccessful, I would probably have gone into the military. I never had a chance to do anything besides law, now, it is the only thing I am competent to do!

What are your plans after your term ends in May 2016? Do you plan on seeking reappointment, or are you tempted to return to private practice?

No reappointment. I will return to private practice, as long as my health remains good.