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Corporate Governance
: The Race to the BottomFogel v. U.S. Energy Systems Inc and Limits on the Authority of Independent Directors
By J. Robert Brown
Delaware courts may provide incentive for boards to have independent directors but they are not about to actually let them run the company. In a series of recent cases, the Delaware courts have gone out of their way to limit the authority of these directors. In Schoon, the Supreme Court refused to allow a single independent director to bring a derivative suit. In Fogel, nicely discussed below by JP Thibeault, the court overturned a decision by the three independent directors of the board when they met for a scheduled meeting and fired the CEO. The court concluded that in fact no meeting had actually occurred. Alternatively, independent directors acted in a deceptive manner in not notifying the CEO in advance of the intent to dismiss him.
Suffice it to say that when independent directors act against a CEO, the pro-management bias of the Delaware courts will surface.
Full post as published by The Race to the Bottom on February 23, 2008 (boomark / email).
Court of Chancery Holds Board Meeting Is Void
Fogel v. U.S. Energy Systems, Inc., C.A. No. 3271-CC (December 13, 2007). Directors often think that if they get together that is a real board of directors' meeting. Not so...
Larry Ribstein on Broughman's Independent Directors
Brian Broughman?s Role of Independent Directors in VC-Backed Firms shows why these closely held firms have independent directors ? not...
Broughman on Independent Directors & VC-Backed Firms
Brian J. Broughman (University of California, Berkeley - School of Law) has posted The Role of Independent Directors in VC-Backed Firms on SSRN. Here is the abstract: This paper seeks to explain the widespread use of independent directors in the...
Court of Chancery Orders Meeting For Bankrupt
Fogel v U.S. Energy Systems, Inc., C.A. No. 3271-CC (January 15, 2008). This is another in a line of decisions holding that the Court of Chancery may order the holding of a stockholders' meeting even if the company is in a bankruptcy proceeding...
Tom Ulen on Broughman's Independent Directors
I very much enjoyed Brian Broughman?s ?The Role of Independent Directors in VC-Backed Firms.? There is much law and economics...
Gordon Smith on Broughman's Independent Directors
Brian Broughman?s paper is an important and provocative contribution to the literature on venture capital contracts and independent directors. His...
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