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Full-Text Articles in Law
Fiduciary Blind Spot: The Failure Of Institutional Investors To Prevent The Illegitimate Use Of Working Americans' Savings For Corporate Political Spending, Leo E. Strine Jr.
Fiduciary Blind Spot: The Failure Of Institutional Investors To Prevent The Illegitimate Use Of Working Americans' Savings For Corporate Political Spending, Leo E. Strine Jr.
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For decades, American workers have been subjected to increasing pressure to become forced capitalists, in the sense that to provide for retirement for themselves, and to pay for college for their children, they must turn part of their income every month over to mutual funds who participate in 401(k) and 529 programs. These “Worker Investors” save for the long term, often hold portfolios that are a proxy for the entire economy, and depend on the economy’s ability to generate good jobs and sustainable growth in order for them to be able to have economic security. In recent years, there has …
Mandating Board-Shareholder Engagement?, Lisa Fairfax
Mandating Board-Shareholder Engagement?, Lisa Fairfax
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This Article not only argues that corporations must be encouraged to enhance the level of communication between shareholders and the board, but also maintains that the benefits of increased engagement are significant enough that we should consider developing standards for incentivizing, if not mandating, more robust board-shareholder engagement for corporations that fail to respond to such encouragement. In the last several years, shareholders not only have gained increased authority over corporate elections and governance matters, but also have demonstrated a willingness to use that authority to challenge, and even reject, management policies and practices. Shareholders also have begun to demand …
Shareholder Eugenics In The Public Corporation, Edward B. Rock
Shareholder Eugenics In The Public Corporation, Edward B. Rock
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In a world of active, empowered shareholders, the match between shareholders and public corporations can potentially affect firm value. This article examines the extent to which publicly held corporations can shape their shareholder base. Two sorts of approaches are available: direct/recruitment strategies; and shaping or socialization strategies. Direct/recruitment strategies through which “good” shareholders are attracted to the firm include: going public; targeted placement of shares; traditional investor relations; the exploitation of clientele effects; and de-recruitment. “Shaping” or “socialization” strategies in which shareholders of a “bad” or unknown type are transformed into shareholders of the “good” type include: choice of domicile; …
Who Should Talk? What Counts As Employee Voice And Who Stands To Gain, Aditi Bagchi
Who Should Talk? What Counts As Employee Voice And Who Stands To Gain, Aditi Bagchi
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This symposium piece responds to an article by Kenneth G. Dau-Schmidt titled "Promoting Employee Voice in the American Economy: A Call for Comprehensive Reform." Professor Schmidt argues in favor of increasing employee voice in corporate governance. In this reply, Professor Bagchi distinguishes between "hard voice," "soft voice" and information rights as three variants of employee voice. She casts doubt on the material benefits from Professor Dau-Schmidt's proposals, which focus on hard and soft voice, to either employees or corporate stakeholders more broadly. The present focus of corporate governance on the relationship between shareholders and managers, to the exclusion of employees, …
Good Faith In Revlon-Land, Christopher M. Bruner
Good Faith In Revlon-Land, Christopher M. Bruner
Scholarly Works
The Delaware Supreme Court has set a very high hurdle for plaintiffs challenging directors' good faith in the sale of a company. In Lyondell Chemical Company v. Ryan, the court held that unconflicted directors could be found to have breached the good faith component of their duty of loyalty in the transactional context only if they "knowingly and completely failed to undertake," and "utterly failed to attempt" to discharge their duties.
In this essay I argue that the Lyondell standard effectively imports into the transactional context the exacting standard previously applied in the oversight context — a move clearly aimed …
Virtual Shareholder Meetings Reconsidered, Lisa Fairfax
Virtual Shareholder Meetings Reconsidered, Lisa Fairfax
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In 2000 Delaware enacted a statute enabling corporations to host meetings solely by electronic means of communication rather than in a physical location. Since that time, several states have followed Delaware's lead, and the American Bar Association has proposed changing the Model Business Corporation Act to provide for some form of virtual shareholder meetings. Many states believed that such meetings would prove to be an important device for shareholders who desire to increase their voice within the corporation. Instead, very few companies have taken advantage of the ability to host such meetings. This Article provides some data on state statutes …
Shareholder Bylaws And The Delaware Corporation, Christopher M. Bruner
Shareholder Bylaws And The Delaware Corporation, Christopher M. Bruner
Scholarly Works
Much like hostile tender offers in the 1980s and 1990s, shareholder bylaws purporting to limit board authority in key areas of corporate governance are, once again, forcing Delaware's courts to grapple with the fundamental nature of the corporate form.
In this (short) essay written for a roundtable discussion at the 2009 Annual Meeting of the Southeastern Association of Law Schools, I discuss CA, Inc. v. AFSCME Employees Pension Plan - the 2008 opinion in which the Delaware Supreme Court began to define the nature and scope of the shareholders' bylaw authority. In CA, Inc. the court held that a proposed …
Shareholder Democracy On Trial: International Perspective On The Effectiveness Of Increased Shareholder Power, Lisa Fairfax
Shareholder Democracy On Trial: International Perspective On The Effectiveness Of Increased Shareholder Power, Lisa Fairfax
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Shareholder democracy - efforts to increase shareholder power within the corporation - appears to have come of age, both within the United States and abroad. In the past few years, U.S. shareholders have worked to strengthen their voice within the corporation by seeking to remove perceived impediments to their voting authority. These impediments include classified boards, the plurality standard for board elections, and the inability to nominate directors on the corporation's ballot. Shareholders' efforts have also extended to seeking a voice on the compensation of corporate officers and directors. Advocates of shareholder democracy believe that such efforts are critical to …
Making The Corporation Safe For Shareholder Democracy, Lisa Fairfax
Making The Corporation Safe For Shareholder Democracy, Lisa Fairfax
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This article considers the effect that increased shareholder activism may have on non-shareholder corporate stakeholders such as employees and consumers. One of the most outspoken proponents of increased shareholder power has argued that such increased power could have negative repercussions for other corporate stakeholders because it would force directors to focus on profits without regard to other interests. This article critically examines that argument. The article acknowledges that increased shareholder power may benefit some stakeholders more than others, and may have some negative consequences. However, this article demonstrates that shareholders not only have interests that align with other stakeholders, but …
Good Faith, State Of Mind, And The Outer Boundaries Of Director Liability In Corporate Law, Christopher M. Bruner
Good Faith, State Of Mind, And The Outer Boundaries Of Director Liability In Corporate Law, Christopher M. Bruner
Scholarly Works
The Delaware General Corporation Law was amended in 1986 to permit shareholder-approved exculpatory charter provisions shielding corporate directors from monetary liability for certain fiduciary duty breaches not including (among other things) breaches of the duty of loyalty and acts not in good faith. This article examines the development of corporate fiduciary duty doctrine in Delaware leading up to and following this statutory amendment, focusing particularly on the Delaware courts' evolving conception of the meaning anddoctrinal status of the good faith concept employed in recent cases to permit a non-exculpable cause ofaction for conscious nonfeasance.
The article argues that Delaware's good …