Corporate Governance

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: The Problem of Private Ordering

Posted on March 18, 2010
We are discussing Kurz v. Holbrook, 2010 Del. Ch. LEXIS 24 (Del. Ch. Feb. 9, 2010). The opinion reemphasized that only record owners had the right to execute a consent (despite the fact that Section 228 applied only to "holders" of outstanding stock)...

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: The Problem of NOBOs

Posted on March 18, 2010
The "inevitability" of the omnibus proxy was not the only basis for concluding that the shares of the brokers and banks could be voted.  The opinion also, in a more far reaching manner, opted to integrate the Cede breakdown into the stock ledger, eliminating Cede from the voting process and treating brokers and banks as if they were record owners...

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: The Role of the Omnibus Proxy

Posted on March 17, 2010
We are discussing Kurz v. Holbrook, 2010 Del. Ch. LEXIS 24 (Del. Ch. Feb. 9, 2010). The most significant long term consequence of the decision, however, was probably the analysis of voting and the implications for a state law system built around record ownership...

Restoring American Financial Stability Act of 2010: Corporate Governance Provisions

Posted on March 16, 2010
We take a temporary breather from our discussion of Kurz v. Holbrook.  The discussion will resume tomorrow. Instead, we turn to Senator Dodd's leviathan bill on financial reform.  We take a moment to briefly discuss the corporate governance provisions included in the Bill (the text is below)...

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Restoring American Financial Stability Act of 2010: Reforming the Independent Director Standard and Federalizing Executive Compensation

Posted on March 16, 2010
The executive compensation provisions provide for say on pay, clawbacks and increased disclosure.  Relying on listing standards, they require that the compensation committee have independent directors.  The Bill also regulates the compensation consultant and counsel hired by the committee...

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: Vote Buying and the Separation of Ownership and Voting Rights

Posted on March 15, 2010
We are discussing Kurz v. Holbrook, 2010 Del. Ch. LEXIS 24 (Del. Ch. Feb. 9, 2010). In analyzing whether the transaction constituted vote buying, VC Laster indicated that there needed to be either disenfranchisement or fraud.  Disenfranchisement occurred where the acquisition 'actually affect[s] the outcome of the vote' or 'it alters the voting pattern in a critical way, such as through coercive tactics reminiscent of tender offer strategies from pre-Williams Act days...

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: The Goal of Profit Maximization

Posted on March 13, 2010
We are discussing Kurz v. Holbrook, 2010 Del. Ch. LEXIS 24 (Del. Ch. Feb. 9, 2010). There is often a debate over whether board are really obligated to engage in profit maximizing behavior.  As commentators sometimes note, corporate statutes don't mention the phrase...

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: Third Party Vote Buying

Posted on March 12, 2010
We are discussing Kurz v. Holbrook, 2010 Del. Ch. LEXIS 24 (Del. Ch. Feb. 9, 2010). Another issue addressed by the court were allegations of vote buying.  These concerns arose because Kurz, a director and member of the TBE Group, acquired shares that could not yet be transferred (due to transfer restrictions) and in the process obtained an irrevocable proxy for the undelivered shares...

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: Invalidating Director Resignation Bylaws

Posted on March 11, 2010
VC Laster, in invalidating a bylaw that would reduce the size of the board and remove incumbent directors, concluded that Section 141 (which gives shareholders the right to remove directors) was the exclusive method of removing directors under Delaware law...

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: Amending the Articles

Posted on March 11, 2010
We are discussing Kurz v. Holbrook, 2010 Del. Ch. LEXIS 24 (Del. Ch. Feb. 9, 2010). In many ways, this is an unusual case.  Certainly, bylaws designed to reduce board size between meetings are not common.  Moreover, while VC Laster made his view clear, that these bylaws are invalid, any uncertainly left over by the case may require companies to address the issue more explicitedly...

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: The Proper Basis for Invalidating the Bylaw

Posted on March 11, 2010
We are discussing Kurz v. Holbrook, 2010 Del. Ch. LEXIS 24 (Del. Ch. Feb. 9, 2010). We are examining the portion of the decision that struck down the bylaw submitted by Crown that would have reduced the size of the board from seven directors to three...

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: Invalidating Director Disability Bylaws

Posted on March 10, 2010
We are discussing Kurz v. Holbrook, 2010 Del. Ch. LEXIS 24 (Del. Ch. Feb. 9, 2010). One issue in the case was whether shareholders could adopt a bylaw that would reduce the size of the existing board from seven directors to three, effectively forcing off the board as many as four incumbent directors (because there were two vacancies and only five incumbents the bylaw actually threatened to unseat two directors)...

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: The Authority of the Board to Remove Directors

Posted on March 09, 2010
We are discussing Kurz v. Holbrook, 2010 Del. Ch. LEXIS 24 (Del. Ch. Feb. 9, 2010). One of the reasons given for striking down the bylaw that reduced the size of the board was that it amounted to a removal of incumbent directors.  Because directors had the same bylaw authority as shareholders, it potentially allowed directors to remove other directors by shrinking the size of the board...

Shareholder Nominated Directors?Condemned to a Life of Lonely and Ineffective Dissent??Maybe Not

Posted on March 09, 2010
             One of the topics that this blog has followed on a regular basis is the effort to allow shareholders to nominate candidates for positions on corporate boards of directors in publicly held corporations...

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: Introduction

Posted on March 08, 2010
Vice Chancellor Laster only recently joined the bench of the Delaware Chancery Court.  He had considerable experience practicing before the Delaware courts, something that shows in his decision making on the Chancery Court to date.  He has already written a number of opinions, some lengthy, that are generally thorough but accessible in their prose...

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: The Facts

Posted on March 08, 2010
The Board of EMAK consisted of five directors and two vacancies.  The fact pattern involved two separate consent solicitations, with each having the goal of acquiring control of the board.  In one case, Crown Emak Partners, a shareholder holding 28% of the voting shares, solicited consents to reduce the size of the Board to three directors...

Karten v. Woltin: Individual Harms Required By Shareholder To Bring A Direct Action

Posted on March 05, 2010
In Karten v. Woltin, 23 So.3d 839 (Fla. Dist. Ct. App. 2009), the parties were shareholders in 201 East Atlantic, Inc., which controlled a restaurant called Louie Louie Too.  The appellant owned a 25% stake in the company while the appellees owned 50% and 25% respectively...

Paulino v. Mace Security: Delaware and Advancements for Fiduciaries

Posted on March 04, 2010
In Paolino v. Mace Security International Inc., Louis D. Paolino, Jr. sought indemnification and advancement of fees and expenses incurred in defending against counterclaims asserted against him by Mace Security International ('Mace').  On December 14, 2010, the Delaware Court of Chancery denied Mace's motion to dismiss the claim for advancement...

SEC v. Assurant: A $3.5 Million Accounting Lesson

Posted on March 03, 2010
In a complaint filed January 21, 2010, the SEC asserts Assurant used improper accounting methods to record payments that the company received. The SEC charges Assurant with violating Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-11, and 13a-13...

eBay vs. Craigslist: Battle to Control the Interest of a Minority Shareholder? (Part 1)

Posted on March 02, 2010
Toward the end of 2009, a case brought by Internet auction giant eBay against Craigslist went to trial in the Delaware Court of Chancery.  See eBay Domestic Holdings Inc. v. Newmark et al., No. 3705-CC.  The case featured testimony from top officials from both companies, including the ex-CEO of eBay and current Republican gubernatorial candidate Meg Whitman...

eBay vs. Craigslist: Battle to Control the Interest of a Minority Shareholder? (Part 2)

Posted on March 02, 2010
The following post concludes the main arguments by plaintiff eBay, Inc. and defendants Newmark, Buckmaster, and Craigslist, Inc. presented in their pretrial briefs. Shareholder Rights Plan: An effort to Control eBay's Interest in Craigslist? Defendants also adopted a Rights Plan ('Rights Plan' or 'Poison Pill') designed to address the threat of a potential hostile takeover, specifically in the event of a 'death problem...

Shareholder Acces and Bank of America

Posted on March 01, 2010
As a kind of denoucement to the BofA, we note an opportunity lost. According to an editorial in the WSJ, the SEC tried, in connection with the proposed settlement with BofA, to get the Bank's agreement to provide shareholders with access to the company's proxy statement for nominees...

Shareholder Access and Bank of America

Posted on March 01, 2010
As a kind of denoucement to the BofA, we note an opportunity lost. According to an editorial in the WSJ, the SEC tried, in connection with the proposed settlement with BofA, to get the Bank's agreement to provide shareholders with access to the company's proxy statement for nominees...

Marion v. TDI and Financing a Fraud: The Need for Proximate Cause

Posted on February 27, 2010
In Marion v. TDI, Inc., 2010 WL 6189 (3d Cir. Jan. 4, 2010), the United States Court of Appeals  for the Third Circuit held that the receiver from a defunct broker involved in a Ponzi scheme had standing to bring suit against third parties who allegedly assisted the scheme...

Guide to SEC Interpretive Guidance on Climate Change

Posted on February 26, 2010
The Race to the Bottom covered the SEC's interpretive guidance on disclosure relating to climate change.  We are pleased to present our readership with a practical guide to the release, courtesy of Armin Sarabi and Lucy Stark at the Denver office of Holland & Hart LLP...

The SEC and Corporate Governance: The Limits of Disclosure (Exchange Act Release No. 61175)(The Growing Polarization in the Corporate Governance Debate)

Posted on February 25, 2010
We are discussing the SEC's latest corporate governance disclosure requirements adopted in Exchange Act Release No. 61175 (Dec. 16, 2009). In a final comment, we note the increasing polarization of the corporate governance debate. In accepting comments, the Commission heard from a wide array of constituencies...

James River Management v. Kehoe: Advancement of Fees and Expenses

Posted on February 25, 2010
In James River Management v. Kehoe, No. 09-387, 2009 WL 4730715 (E.D. Va. Dec. 8, 2009), the District Court of the Eastern District of Virginia granted a motion for advancement of fees and expenses to defendant from a Delaware-chartered company and denied the same motion to defendants from the company's Ohio-incorporated subsidiary...

The SEC and Corporate Governance: The Limits of Disclosure (Exchange Act Release No. 61175)(A Tentative Foray into Board Diversity)

Posted on February 24, 2010
We are discussing the SEC's latest corporate governance disclosure requirements adopted in Exchange Act Release No. 61175 (Dec. 16, 2009). Board diversity can be an important societal concern.  It can also affect the decision making process.  Greater diversity may result in a wider range of views that can be shared with the CEO and other officers in making important decisions...

The SEC and Corporate Governance: The Limits of Disclosure (Exchange Act Release No. 61175) (An Introduction)

Posted on February 23, 2010
We have noted before that the SEC has in recent years become more enmeshed in the corporate governance process. SOX largely gave the SEC control over audit committees.  Access involves rule changes that would facilitate the election of directors nominated by shareholders...

The SEC and Corporate Governance: The Limits of Disclosure (Exchange Act Release No. 61175) (Disclosure and Transparency in the Voting Tabulation Process)

Posted on February 23, 2010
We are discussing the SEC's latest corporate governance disclosure requirements adopted in Exchange Act Release No. 61175 (Dec. 16, 2009) and the use of disclosure to influence corporate governance.  One of the interesting changes in Exchange Act Release No...

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