Delaware's Top Five Worst Shareholder Decisions for 2011 (#1: The Continuing Concern over the Lack of Diversity on the Delaware Courts)

The Delaware courts, as anyone involved in the corporate area knows, has disproportionate influence, particularly in the area of governance.  In many ways, the courts set fiduciary standards that are, in effect, national in scope. 

Yet the two principle courts -- the Delaware Court of Chancery and the Delaware Supreme Court -- that determine these standards are remarkably undiverse.  The two courts have ten jurists.  The Supreme Court has five justices, four men and one woman.  There are no people of color.  The Court of Chancery has five Chancellors or Vice Chancellors.  There are no women or people of color.  So the two courts collectively have 10% women and 0% persons of color. 

Needless to say, these numbers are hardly reflective of the make-up of the United States.  The country has slightly more than 50% women and 35% people of color (including four states with a majority of minorities).  Even boards of directors of public companies, bodies that are routinely criticized for a lack of diversity, do better than this. 

What about an apples to apples comparison?  How does this lack of diversity compare to the federal courts?  Of the 162 active judges in the US Court of appeals, 49 are women (30%).  The percentage of trial judges?  30%.  See also Lehrer Thesis, at 81 ("the number of female federal judges has increased from 1.2% to 29.5% between 1977 and early 2010.").  Moreover, the trend has accelerated under President Obama. As one AP Story reported:  "Of the 98 Obama nominees confirmed to date, the administration says 21 percent are African-American, 11 percent are Hispanic, 7 percent are Asian-American and almost half — 47 percent — are women."

Does diversity matter?  Some certainly think it does.  When President Obama nominated Elena Kagan to the Supreme Court, he had this to say: 

• It is, as Justice Ginsburg recently put it, “one of the most exhilarating developments” -- a sign of progress that I relish not just as a father who wants limitless possibilities for my daughters, but as an American proud that our Supreme Court will be a little more inclusive, a little more representative, more reflective of us as a people than ever before.

Diversity in the Delaware court system is lacking in other ways.  We have noted that most have experience in law firms with a management orientation. 

What about the law schools attended?  Almost all are private and on the East Coast.  Those on the Chancery Court and Supreme Court graduated from Duke (Glasscock), Penn (Holland, Strine and Noble), Boston University (Berger), Harvard (Jacobs), Catholic (Ridgely), and Georgetown (Parsons).  Only two members of the court graduated from a state school, the University of Virginia (Steele & Laster). 

How does this compare to the federal courts?  See Lehrer Thesis, at 41 ("Thus, while these percentages are occasionally a bit more or a bit less, it generally holds true that a slight majority of district court judges attend private or Ivy League institutions for undergraduate and law school.").  In other words, the Delaware bench is more heavily weighed toward private schools than the federal bench. 

We rank this issue #1 this year because the opportunity arose to increase the court's diversity.  The Chancery Court had a vacancy.  The person selected to fill the vacancy, VC Glasscock, looks from his background and initial round of opinions, to be a smart and able jurist.  Nonetheless, he continues the pattern of appointments that lack diversity.  Whatever benefits that arise from a diverse bench, therefore, they are benefits that are not available to the Delaware Chancery Court and Delaware Supreme Court.