With the able assistance of Bill Clark (one of the finest business legislation drafters around), North Dakota has adopted legislation that permits public companies to opt into a legislative scheme that includes a whole bunch of rules that are reported to be “shareholder friendly.”  Mark Roe says (and I think he’s right) that we shouldn’t expect to see companies reincorporating in North Dakota; more likely, he says, is the possibility that IPO companies will use the new North Dakota option (although Mark wisely doesn’t put money down on this either).  Some say, in any event, that this puts a whole lot of pressure on us in Delaware to do something similarly “shareholder friendly.”

The logic of this escapes me.  I’m pretty confident that if anyone thought that this North Dakota package of rules was really a good thing for a public company, they could create the same package by incorporating in Delaware (or lots of other states, for that matter) under a Certificate of Incorporation that adopted all of the North Dakota provisions.  (Section 102(b)(1) of the Delaware General Corporation Law would permit any company incorporated there to do so.)  Or, if you thought that one or two of these provisions was a bad idea, you could simply leave them out.  Some people, for example, don’t think it’s a good idea to have a permanent statutory compulsion to separate the Chairman and Chief Executive Officer positions; others might want a threshold lower than 5% (the North Dakota rule) to qualify as a shareholder eligible to get access to management’s proxy statement.

As far as I can tell, however, it’s not clear that you can pick and choose pieces you like and throw out the ones you don’t like if you adopt a corporate charter that elects to be governed by the “shareholder friendly” North Dakota statutory package.  In terms of freedom of choice, this is pretty thin soup.  Can you imagine how a good shareholder activist would respond to a board-proposed charter amendment that provided for proxy access and mandated majority voting, but at the same time created a staggered board?  You’d hear howls of unfair bundling so fast it would make your head spin.  (Unless, of course, the SEC shot it down first under Rule 14a-4 for just that reason.)  Why should bundling accomplished by the North Dakota act be viewed as more benign?

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