Corporate Governance

Berger v. Pubco: What does Pubco say about appraisal versus fiduciary remedies (and the difference between ?fair price? and ?fair value?)?

Posted on August 07, 2009
Despite the comments above, it's clear that Pubco is a finely calibrated decision, even a cautious one in asserting minorities' rights in the face of short form mergers. Put most dimly, on Pubco's facts, what we have is an adjudicated fiduciary (disclosure) breach, where the court has denied the minorities a genuine fiduciary remedy...

Berger v. Pubco: What does Pubco tell us about the larger arc of the fiduciary duty of disclosure?

Posted on August 06, 2009
The Delaware courts have long wrestled with the Fiduciary Duty of Disclosure (FDD), though its roots, and its relevance to controllers, date back (as a 'duty of complete candor') to 1978 with the Supremes' Lynch v. Vickers Energy decision. Out of concern for staying out of the Feds' way, in 1997 then Vice Chancellor (now Chief Justice) Steele in essence sought to kill off the FDD with his ruling in Malone v Brincat: that even knowing misrepresentation of earnings by a board would not constitute a fiduciary breach...

Berger v. Pubco: What does Pubco mean for ?federalism? ? the federal-state line in regulating corporate affairs?

Posted on August 06, 2009
As many commentators have noted (with different views of its import), federal laws and regulations and especially the Sarbanes Oxley Act (along with changes they inspired in stock exchanges' regulations), taken cumulatively, are impinging on territory once safeguarded to corporate internal affairs and hence state corporate law...

Berger v. Pubco: An Introduction

Posted on August 05, 2009
Some corporate cases scream out their importance from the get go, but Berger v Pubco wasn't one of them. Now we know better. The Supreme Court, en banc, has just (this July, 2009) reversed the Court of Chancery, holding not only that the fiduciary duty of disclosure remains alive and well in §253 short form mergers; but also that a more minority-friendly, more practicable and affordable 'quasi-appraisal' process will be available, in equity, to give it force...

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Faith Stevelman Blogs on the Race to the Bottom

Posted on August 05, 2009
We are pleased to have Faith Stevelman begin a series of six posts today on Berger v. Pubco, a Delaware Supreme Court decision defining the remedies for minority shareholders in a short form merger when they have not received the information needed to decide whether to exercise appraisal rights...

Berger v. Pubco: What does Pubco tell us about how Glassman has been interpreted?

Posted on August 05, 2009
Pubco is the most important statement from Delaware on fiduciary review in short form mergers since Glassman (decided by the Delaware Supreme Court in 2001) -- it's interesting that eight years have gone by without a meaningful revisiting by Delaware's highest court of the open issues therein, but that's for another day...

Corporate Governance and the SEC: The Remaining Problems

Posted on August 04, 2009
We are discussing Exchange Act Release No. 60280 (July 10, 2009), the SEC's recent set of rule proposals designed to improve disclosure in connection with the corporate governance process. The proposals leave two critical issues unaddressed.  The first concerns blank voting...

Corporate Governance and the SEC: Rapid Disclosure of Interim Results and Improving the Integrity of the Voting Process

Posted on August 03, 2009
We are discussing Exchange Act Release No. 60280 (July 10, 2009), the SEC's recent set of rule proposals designed to improve disclosure in connection with the corporate governance process. Public companies have to report the voting results of shareholder meetings...

Nacchio Gains a 10th Circuit Court Victory on his Sentence and Forfeiture

Posted on August 01, 2009
Yesterday, the 10th Circuit panel reversed Nottingham's 'gain' and forfeiture determinations and remanded the case back to the district court to follow the 10th circuit's instructions on the proper calculations. These instructions could have the effect of reducing the 'gain' for federal sentencing purposes to reduce Nacchio's six year sentence to 3 to 4 years and of reducing his forfeiture of approximately $52,000,000 to $44,600,000 representing the gross proceeds of $52,000,000 less the brokerage expenses and perhaps the cost of exercising the options...

Corporate Governance Reform and the SEC: Separating the CEO and Chairman of the Board

Posted on July 31, 2009
We are discussing Exchange Act Release No. 60280 (July 10, 2009), the SEC's recent set of rule proposals designed to improve disclosure in connection with the corporate governance process. One of the most obvious areas of abuse concerns the resolute insistence by most public companies to have the CEO serve as chairman of the board...

Corporate Governance Reform and the SEC: Imposing Qualifications on the Board

Posted on July 30, 2009
We are discussing Exchange Act Release No. 60280 (July 10, 2009), the SEC's recent set of rule proposals designed to improve disclosure in connection with the corporate governance process. The Commission has proposed significant increases in the amount of disclosure that must be provided for directors and nominees to the board...

Corporate Governance Reform and the SEC: Diversity on the Board

Posted on July 30, 2009
We are discussing Exchange Act Release No. 60280 (July 10, 2009), the SEC's recent set of rule proposals designed to improve disclosure in connection with the corporate governance process. We have written a great deal on this Blog about the lack of diversity on corporate boards and the need to expand the applicable pool of candidates...

Corporate Governance Reform and the SEC: Reversing In re Citigroup

Posted on July 29, 2009
We are discussing Exchange Act Release No. 60280 (July 10, 2009), the SEC's recent set of rule proposals designed to improve disclosure in connection with the corporate governance process. A significant portion of the release addresses the need to enhance disclosure of practices that relate to corporate risk taking...

Corporate Governance Reform and the SEC: Affecting the Stubstantive Behavior of the Board

Posted on July 28, 2009
The SEC has put out a relatively massive proposal to improve corporate governance disclosure.  Exchange Act Release No. 60280 (July 10, 2009) prints off at a hefty 137 pages. The release contains a number of proposals, some centering around compensation, some around director disclosure...

Corporate Governance Reform and the SEC: Affecting the Substantive Behavior of the Board

Posted on July 28, 2009
The SEC has put out a relatively massive proposal to improve corporate governance disclosure.  Exchange Act Release No. 60280 (July 10, 2009) prints off at a hefty 137 pages. The release contains a number of proposals, some centering around compensation, some around director disclosure...

Broker Non-Voting and the SEC: The Next Steps

Posted on July 27, 2009
With Rule 452 amended, are matters finished?  Not exactly.  First, the rule applies to members of the NYSE.  Brokers that are not subject to the requirement are outside the rule's boundaries.  That means that brokers who hold shares for NYSE or Nasdaq companies but are not members of the NYSE (only members of FINRA) can vote in uncontested elections (or on any other matter)...

Starbucks and Social Responsibility: Redux

Posted on July 26, 2009
We have occasionally written on this Blog about Starbucks.  Starbucks has had a rough time financially recently, even before the current crisis caused cutbacks among latte drinking professionals.  We noted that part of the problem came from the apparent decision by Starbucks to market itself as a commodity...

Broker Non-Voting and the SEC: The Rationale

Posted on July 24, 2009
We are discussing the SEC's decision (by a 3-2 vote) to approve amendments to NYSE Rule 452 that prohibited brokers from voting uninstructed shares held by beneficial owners in uncontested elections for the board of directors. Was there any good reason for opposing the amendment to Rule 452?  The only potential issue was, that by depriving brokers of the right to vote in uncontested elections, the shares would not be present at the meeting, making it harder to obtain a quorum...

Broker Non-Voting and the SEC: Background

Posted on July 23, 2009
We are a bit late (as usual) in commenting on the Commission's decision (by a thin 3-2 margin) to amend Rule 452 of the NYSE to designate the uncontested election of directors as a controversial matter not subject to discretionary voting by brokers.  Discretionary voting covers shares owned by broker clients where the clients do not submit voting instructions...

Broker Non-Voting and the SEC: The Incumbent Advantage

Posted on July 23, 2009
It took the SEC until July 2009 to authorize the proposed amendment to NYSE Rule 452 to designate uncontested elections to the board as a non-routine matter (thereby preventing brokers from voting uninstructed shares held by beneficial owners on the matter)...

City of Westland v. Axcelis Technologies: Majority Voting and Delaware Law (The Beginning of the Evisceration)

Posted on July 22, 2009
We are discussing CITY OF WESTLAND POLICE & FIRE RETIREMENT SYSTEM v. AXCELIS TECHNOLOGIES, INC., a case involving the invocation of inspection rights to investigate the reasons why the board of directors of Axcelis did not accept the resignation of three directors who failed to receive majority support from shareholders voting in the election...

City of Westland v. Axcelis Technologies: Majority Voting and Delaware Law (Plurality Plus v. Majority Vote)

Posted on July 21, 2009
We are discussing CITY OF WESTLAND POLICE & FIRE RETIREMENT SYSTEM v. AXCELIS TECHNOLOGIES, INC., a case involving the invocation of inspection rights to investigate the reasons why the board of directors of Axcelis did not accept the resignation of three directors who failed to receive majority support from shareholders voting in the eleciton...

City of Westland v. Axcelis Technologies: Majority Voting and Delaware Law (The Demand to Inspect)

Posted on July 20, 2009
We are discussing CITY OF WESTLAND POLICE & FIRE RETIREMENT SYSTEM v. AXCELIS TECHNOLOGIES, INC., a case involving the invocation of inspection rights to investigate the reasons why the board of directors of Axcelis did not accept the resignation of three directors who failed to receive majority support from shareholders voting in the eleciton...

City of Westland v. Axcelis Technologies: Majority Voting and Delaware Law (Defendant's Response)

Posted on July 20, 2009
We are discussing CITY OF WESTLAND POLICE & FIRE RETIREMENT SYSTEM v. AXCELIS TECHNOLOGIES, INC., a case involving the invocation of inspection rights to investigate the reasons why the board of directors of Axcelis did not accept the resignation of three directors who failed to receive majority support from shareholders voting in the election...

SEC Investigates Staff Members for Insider Trading

Posted on July 18, 2009
Two United States Securities and Exchange Commission ('SEC') employees are currently under investigation for suspected insider trading and other SEC regulatory violations. The investigation, which the SEC Office of the Inspector General ('SEC OIG') turned over to the United States Attorney's Office and the Federal Bureau of Investigation, focuses on two currently unnamed Enforcement Division attorneys...

City of Westland v. Axcelis Technologies: Majority Voting and Delaware Law (The Facts)

Posted on July 17, 2009
Axcelis "designs, manufactures and services ion implantation, dry strip and other processing equipment used in the fabrication of semiconductor chips."  See Annual Report on Form 10-K, March 31, 2009. The company has a staggered board. (A proposal to repeal the provision passed in 2008 by about 76 million votes for, about 6 million against, but failed because it obtained less than 75% of the outstanding shares)...

SEC v. Cuban: Case Dismissed (The Analysis)

Posted on July 17, 2009
The trial judge dismissed the Cuban case because the confidentiality agreement alleged to have been executed by Cuban did not inclue a ban on trading. There are several problems with the analysis.  Despite the prodigious effort by the court to separate the concept of confidentiality and use, the two are not so clearly separated...

SEC v. Cuban: Case Dismissed (The Rational)

Posted on July 17, 2009
The issue was whether the alleged confidentiality agreement orally executed by Cuban before trading in the Company's shares was enough to create a duty of "trust and confidence" that meant he couldn't trade on the information. The trial court found first that the matter was not controlled by state law (concerning the definition of duty)...

SEC v. Mark Cuban: Dismissed

Posted on July 17, 2009
The district court dismissed the SEC's case against Mark Cuban today.  A copy of the opinion is posted on the DU Corporate Governance web site. The case involved allegations that Cuban violated the prohibitions on insider trading when he received material non-public information from the CEO of Mamma...

City of Westland v. Axcelis Technologies: Majority Voting and Delaware Law (Introduction)

Posted on July 16, 2009
In the Phyrric battle over access back in 2007, the Commission declined to allow an extremely mild form of access.  No one was talking about direct access to the company's proxy statement.  Shareholders merely wanted the right to submit a bylaw that if it passed, would allow inclusion of nominees the following year...

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