A recent Delaware Supreme Court decision has significant implications for corporations with majority voting standards where incumbent directors fail to receive the required level of support and tender their resignations to the board of directors. The decision, City of Westland Police & Fire Retirement System v. Axcelis Technologies, Inc., provides stockholders with a roadmap for inspecting a corporation’s books and records after a board refuses to accept the directors’ resignations.

Background

In Axcelis, the corporation had a “plurality plus” governance policy in which directors were elected by a plurality of the votes cast but were subject to a board policy that required directors to tender their resignations if the votes cast “withheld” were greater than the number of votes cast “for” such persons. At its 2008 annual meeting, the three directors who sat on the corporation’s classified board of directors failed to receive majority support from the stockholders and tendered their resignations. The board, however, refused to accept their resignations, noting that one of the directors was the corporation’s lead independent director and each of them sat on key board committees.

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