Corporate Governance

As Predicted: The SEC and the Further Denial of Shareholder Access (VC Strine and the Appearance of Bias)(Part 7)

By J. Robert Brown

We have taken the position that Delaware jurists sometimes fail to demonstrate an adequate judicial temperament by speaking on issues that might come before them. In CA v. AFSCME, we see some of the consequences of this approach. The Company took the position that there was no consensus that a short slate of directors was beneficial, that it could lead "to dissent but no real change in policy."  Authority for the point?   VC Strine.  As the brief quoted:

• Short slates are oddments to the traditionalist. Boards make decisions collectively, almost invariably by consensus; individual directors do not make business decisions. Traditionalists find contests that involve competing slates more meaningful and productive than contests that single out particular directors for responsibility for decisions that an entire board made. If the goal is to implement a rational system of elections, then stockholders ought to have the opportunity to present a full slate proposing an alternative platform. And when they do not choose to run a full slate, the incumbents ought to be able to point out as an election argument that the insurgents are not willing to propose a full governing board but are simply presenting a few dissenters for the boardroom.  Leo E. Strine, Jr., Toward a True Corporate Republic: A Traditionalist Response to Bebchuk’s Solution for Improving Corporate America , 119 Harv. L. Rev. 1759, 1780-81 (2006).

VC Strine did not mention that the incumbents also ought to be able to make the argument to the same courts where he works but that did not stop the Company in this case.  While he was merely expressing his opinion, it was an opinion on an issue that, but for the inappropriate decision by the SEC to certify a question to the Delaware Supreme Court, might well have been argued in his courtroom.   

Whatever a proper judicial disposition means, it ought to suggest the need to avoid taking positions that will later be used by litigants in the same court.   

Full post as published by The Race to the Bottom on July 08, 2008 (boomark / email).