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Corporate Governance

: The Harvard Law School Corporate Governance Blog

Delaware Provides Guidance on Majority Vote Resignations

By Harvard Law School Program on Corporate Governance

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Editor?s Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton firm memorandum by Mr. Lipton regarding the recent decision of the Delaware Supreme Court in City of Westland Police & Fire Retirement v. Axcelis Technologies, Inc., which is available here; we understand that certain of the objecting shareholders intend to appeal this decision.

A recent decision by the Delaware Supreme Court, City of Westland v. Axcelis, provides important guidance for situations where a director who has failed to obtain the requisite majority for reelection resigns in accordance with the company?s resignation policy and the resignation is not accepted by the board of directors.

The board had adopted a standard majority-vote-resignation policy. A shareholder attacking the rejection of the resignation argued?citing the famous Blasius case? that the board had the burden of showing a ?compelling justification? for rejecting the resignation and continuing the director in office. The court rejected the argument and applied the business judgment rule.

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Full post as published by The Harvard Law School Corporate Governance Blog on August 21, 2010 (boomark / email).