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At 600 Grant St. in Pittsburgh stands the tallest building in Appalachia. The 64-story U.S. Steel Tower, containing more than 44,000 tons of structural steel and barricaded by massive steel columns, symbolizes the Steel City and its industry. That structure dominates the Pittsburgh skyline, but its eponymous tenant no longer dominates the building. A regional medical center has occupied it since 2008. Soon, it might serve as a memorial to the steel industry it once towered over.
In August, the board of U.S. Steel announced that the company was for sale. After receiving multiple unsolicited bids for full or partial acquisition, the board concluded it was in the best interests of the shareholders to consider the offers and solicit new ones. But the outcome of this “review of strategic alternatives” has implications far beyond the capital gains of the company’s ownership.
U.S. Steel is the among the largest integrated steelmakers in the country. If it falls into the wrong hands, our industrial base and national security could be at risk. But the corporation’s board is unlikely to care about that, because legally it’s not required to — thanks to a 37-year-old doctrine of American corporate law.
In general, courts are reluctant to micromanage corporate boards’ decisions on behalf of shareholders. That reluctance is grounded in recognition that the course of action that best serves shareholders’ long-term interests — be it an expansion into a new market or closing a segment of the business — requires prudence and patience foreclosed by an emphasis on fluctuations in the short-term share price.
But that changes the moment an active bidding process begins. At that point, by the logic of corporate legal doctrine, each shareholder’s only remaining interest is receiving as much money in the immediate term as possible — regardless of whether any given shareholder actually cares to sell or whether a sale serves the firm’s long-term interests. As the Delaware Supreme Court explained, the role of board directors changes “from defenders of the corporate bastion to auctioneers charged with getting the best price for the stockholders at a sale of the company.” All other interests or obligations must be set aside.
This swing position in corporate duties is called the “Revlon doctrine,” named for the Delaware case in question, and it has set the standard in corporate law since the 1986 decision. Today, it’s where the board of U.S. Steel likely finds itself. By reviewing and soliciting bids for acquisition, it has effectively put the company up at auction.
If U.S. Steel is sold, shareholders can expect a windfall — no wonder the stock price has spiked — but little else is certain. The highest bidder will own the company, no matter their intentions for the business. An institutional investor could buy the company and strip it for parts. A private individual with no industry experience could buy it. A foreign competitor could acquire it and own a significant chunk of America’s steel production. Any of these outcomes is possible.
The risks of a foreign acquisition are especially palpable. The Biden administration has left President Donald Trump’s Section 232 tariffs on steel imports in place, recognizing that the preservation of the domestic steel industry remains vital to our national security. Regardless of a foreign buyer’s motives, the foreign ownership of assets of such national importance could jeopardize our security. It’s why foreign acquisition of U.S. Steel now faces bipartisan opposition.
The Revlon doctrine does not countenance such concerns. According to Revlon, the long-term trajectory of the company should not matter, nor should the implications for the nation. All that matters is the outcome of an auction.
That doctrine should strike us as not only troubling in the present but absurd in principle. Patriotism is not self-dealing. Nor is a corporation reducible to the net present value of its assets. Our laws should not prescribe an approach to corporate stewardship that forsakes this common sense.
The Revlon doctrine might require U.S. Steel to be sold to the highest bidder, but America cannot afford to auction off its industrial base.
For half a century, the American steel industry has suffered crisis after crisis. Though successive policy interventions have stemmed the bleeding, they have not restored the industry to its former glory. Steel production is more than half what it was about 50 years ago before the first steel crisis struck. For the steelworkers and steel towns across the Rust Belt, the crises have lasting consequences.
In hindsight, the steel industry was but the canary in the coal mine, the first victim of what a growing consensus now recognizes as deindustrialization wrought by hostile foreign competition. But the plight of this once-dominant corporation reveals how American industrial might can be undermined by forces both foreign and domestic — including our very laws.
The board of U.S. Steel must reject any bid from a foreign acquirer. If the courts attempt to block them, then Congress should intervene. We must ensure that corporate transactions such as the sale of U.S. Steel advance our nation’s power and prosperity. If we do, we might rescue 600 Grant St. from becoming yet another rusty memorial of American decline.
