Matteo Gatti is Professor of Law at Rutgers Law School. This post is based on his recent article published in the NYU Journal of Law and Business, and is part of the Delaware law series; links to other posts in the series are available here. Related research from the Program on Corporate Governance includes Are M&A Contract Clauses Value Relevant to Target and Bidder Shareholders? by John C. Coates, Darius Palia, and Ge Wu (discussed on the Forum here) and The New Look of Deal Protection by Fernan Restrepo and Guhan Subramanian (discussed on the Forum here).
Corwin v. KKR is considered one of the most important corporate law decisions of this century. Corwin shields directors from the enhanced scrutiny of Revlon in favor of the business judgment rule whenever a transaction “is approved by a fully informed, uncoerced vote of the disinterested stockholders.” Commentators see Corwin as the poster child of an increasingly more restrained approach by Delaware courts—something labeled with expressions such as “Delaware’s retreat,” “the fall of Delaware standards,” and even “the death of corporate law.”
Supporters of the decision applaud the shift from courts to markets in determining whether directors satisfactorily performed in the sale of the company. In an age of enhanced investor sophistication due to the growing size of institutional ownership, the argument goes, the judiciary has ceded the role of optimal decision maker to shareholders. However, the mainstream view among scholars is that Corwin is a setback in shareholder protection. To some, directors’ legal obligations are now limited to full disclosure. Others think that enhanced scrutiny is no longer available and the sole constraint directors face is the shareholder vote. In the views of critics of Corwin, the structure, nature, and quality of the substitute (vote vs. judicial review) are not compelling.
Letter to Clayton and Hinman on Virtual and Hybrid Meetings
More from: Amy Borrus, Josh Zinner, Lisa Woll, Mindy Lubber, Sanford Lewis, Ceres, Council of Institutional Investors, Interfaith Center on Corporate Responsibility, Shareholder Rights Group, US SIF
Amy Borrus is Executive Director at the Council of Institutional Investors; Sanford Lewis is Director of the Shareholder Rights Group; Mindy Lubber is President and CEO of Ceres; Lisa Woll is CEO of US SIF; and Josh Zinner is CEO of the Interfaith Center on Corporate Responsibility. This post is based on their letter to SEC Chairman Jay Clayton and division of corporation finance director William Hinman.
We are writing on behalf of the investors, asset managers and asset owners represented by our members, who collectively represent hundreds of institutional investors with at least $45 trillion in assets under management. Our organizations recognize the exceptional circumstance of this year’s AGM season in the midst of the Covid-19 crisis. Due to this pandemic, shareholder meetings at most companies quickly went from being in-person to virtual. This led to considerable confusion and technical difficulties, in many cases inhibiting shareholder participation in meetings. We are concerned about the potential for poor precedents for conduct of shareholder meetings, and in some circumstances, deliberate actions that limited shareholder participation at various companies. Although we recognize that state law, individual companies and intermediaries must step up, we believe that there are appropriate steps that the SEC can take to help improve the situation.
Certainly there was substantial strain on many corporate secretaries this year given the late hour of the change from in person to virtual meetings for most companies, as well as the need to conduct meetings with management and board members in multiple locations due to travel and public health restrictions, relying on sometimes iffy technology and broadband connections. We understand that Broadridge, which had provided the platform for nearly all virtual meetings before the pandemic, did not have bandwidth to accommodate all companies to hold meetings when they had planned. And we appreciate the April 7th guidance provided by the SEC, and that other providers became more active in offering virtual meeting platforms. [1]
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