Berkeley Program in Law and Economics

In recent years, legal options (ex ante and ex post choices created by law) have gained acceptance in the European Union. Notwithstanding the move toward soft law measures, the EC’s appetite for options or pro-choice company law provisions remains unclear. There are significant barriers to the EC’s ability to promote efficient regulatory choice due to interest group pressures, diffuse control over the agenda-setting process, and a limited capacity to anticipate and meet a wide range of Member State demands.

This article shows that bringing options to the forefront of company law reform can reduce costs for small and medium-sized firms and provide clear benefits to companies that differ in their ownership and control structure from most large public corporations. Switching to a company law regime with different sorts of options can have a good effect on stakeholders as well. As a regulatory strategy, we advocate a step-by-step change, beginning with the adoption of a limited number of opt-in provisions.