Corporate Governance

As Predicted: The SEC and the Further Denial of Shareholder Access (The Anticipated Result) (Part 17)

By J. Robert Brown

The Delaware Supreme Court ruled yesterday on the two questions certified by the SEC.  It should have dismissed the case for lack of jurisdiction but ignored the inconvenient fact in order to come down firmly on the side of management and all but prohibit meaningful bylaws that provide for reimbursement in the event of a successful proxy solicitation.  Bad enough the result, worse that the reasoning was unbalanced and incomplete.  We will explore these points in subsequent posts.  But one thing is for certain, the result was entirely predictable, dictated by notions of the race to the bottom.

Mostly though we again note that as a matter of policy it was a serious mistake for the Commission to refer this case to the Delaware Supreme Court.  Rather than resolve a straightforward legal issue, the Delaware Supreme Court took the opportunity to use reasoning that will allow companies to challenge even more proposals submitted under Rule 14a-8.  It will, ultimately, put pressure on the Commission to sidestep the anti-shareholder nature of Delaware law and allow access to the company's proxy statement.  In other words, the decision will backfire on the Commission and backfire on companies.  We will explore this in later posts.

The opinion is posted on the DU Corporate Governance web site.

Full post as published by The Race to the Bottom on July 18, 2008 (boomark / email).