2024 Proxy Season Trends: Mid-Season Review

Introduction

The 2024 Proxy Season has so far produced surprises, unpredictability, new tactics and responses, and a new(ish) player.

Surprises: Management’s clean sweep successes in proxy contests, notwithstanding the use of universal proxy cards (UPCs).

Unpredictability: Delaware court decisions disrupting market practices.

New Tactics and Responses: Litigation against the 14a-8 regime and proponents’ new strategies.

New(ish) Player: The resurgence of labor activism at the proxy ballot box.

  I. 2024: The Year the UPC Regime Favored Management?

Perhaps the most notable trend emerging from proxy contests in 2024 is the dearth of dissident nominees elected. Seven of the eight proxy contests that have gone to a vote in the US this year have resulted in management clean sweeps, including proxy contests at large cap companies such as Crown Castle Inc. (Crown Castle) and The Walt Disney Company (Disney). The only proxy contest thus far to result in the election of dissident nominees was at Norfolk Southern Corporation (NSC), where three dissident nominees were elected. But even the NSC vote could be construed as a partial victory for management since the dissident had nominated seven nominees, a control slate, and the dissident’s preferred CEO candidate was not elected.

Management nominees found success even when ISS and/or Glass Lewis did not recommend in favor of all management nominees. Management won a clean sweep at Whitestone REIT, GrafTech International Ltd., Crown Castle, and Disney despite a recommendation for at least some dissident nominees from ISS and/or Glass Lewis. Furthermore, only three dissident nominees were elected at NSC despite ISS recommending for five dissident nominees and Glass Lewis recommending for six dissident nominees.[1]

While the votes of most institutional shareholders are not yet published as of the date of this writing, large, passive institutional shareholders appear to have supported management candidates at a higher rate this year than may be expected based on last year’s results.[2] Vanguard has recently disclosed that it voted in favor of all NSC management nominees and The Deal reported that State Street voted in favor of all NSC nominees and BlackRock only voted in favor of one dissident nominee at NSC. Vanguard also disclosed that it voted for all management nominees in Disney’s proxy contest with Trian and Blackwells. Finally, The Deal reported that Vanguard likely voted in favor of all management nominees at Crown Castle (since no dissident candidate received as many votes as Vanguard’s total voting power). Despite the ease with which the UPC rules allow for dissidents to elect at least one nominee to the Board, and ISS’s and Glass Lewis’s recommendations in favor of dissident candidates at certain proxy contests, the foregoing could help explain management’s success this year.

What do these results say about the balance of power in proxy contests between management and activists? It is difficult to draw any definitive conclusions with confidence. Notwithstanding the changing legal landscape further described in Section II below, settlements between companies and activists remain robust, and perhaps contests this year that would have otherwise resulted in dissident victories were settled prior to the vote. Furthermore, these results may not portend a more favorable environment for management in proxy contests going forward, and instead may only reflect the quality of the dissidents’ arguments and nominees this year. In its voting report on Disney, Vanguard noted that, although it had concerns about the Board’s oversight and composition, it was “unable to determine that the [Trian and Blackwells] nominees represented the optimal remedy.” Similarly, at NSC, despite acknowledging that the dissident had made a case for change, Vanguard “question[ed] whether the case for change (with its associate risks of disruption) outweighed the benefits of exercising patience with the incumbent board.” Ultimately, Vanguard opted for patience with the incumbent Board nominees, albeit with stern warnings that their assessment could change should underperformance and/or governance failures continue.

Many other large, passive investors may have arrived at similar conclusions at NSC and this year’s other proxy contests. In recent years, many public companies have deployed a robust a shareholder engagement program to stymie the threat of proxy contests in the UPC era. Through these programs and through developing relationships over several years, some incumbent Boards may have cultivated a level of trust with larger, longer-term shareholders where such holders often represent the crucial swing votes. Those relationships appear to be paying off this year. It remains to be seen how patient shareholders remain in the years to follow.

II. Delaware Corporate Law Becomes Less Predictable

A more concerning theme of the 2024 proxy season is the rash of controversial Delaware court decisions disrupting market practice and threatening the predictability of Delaware law.

In W. Palm Beach Firefighters’ Pension Fund v. Moelis & Co., the Delaware Court of Chancery upended market practice by invalidating certain provisions of a shareholder agreement that were deemed to deprive the Board of Directors of its authority to manage the business and affairs of a corporation under Delaware General Corporation Law (“DGCL”) §141(a). Moelis addressed an agreement between a corporation and its CEO/Chair/controlling shareholder that restricted the Board from taking certain actions [3] and provided the shareholder with a veto over other Board decisions.[4] The court found that granting veto rights over certain Board decisions and the power to determine the composition of Board committees was facially invalid and contravened Section 141(a)’s requirement that, absent a charter provision [5] to the contrary, a corporation be managed by its Board.

The Moelis decision could implicate many common provisions in settlement agreements between companies and activist shareholders, including: requiring the Board to recommend shareholders vote in favor of the activist’s director nominees; the activist’s right to fill Board vacancies caused by the departure of its designated director(s); and pre-determined limits on Board size and representation of the activist-designated director(s) on Board committees. Moelis has therefore unsettled the settlement process between companies and activists and increased the risk that prior settlements could be invalidated.

The fallout from Moelis in the marketplace was swift. Four days after Moelis was decided, dissident shareholder Boots Capital Management filed a complaint in the Delaware Court of Chancery seeking to invalidate a December 2023 cooperation agreement between Crown Castle and Elliott Management. The cooperation agreement required the Board appoint two Elliott-selected directors, include such directors on specific committees and recommend that shareholders vote for such directors at the 2024 annual meeting.  In response, Crown Castle and Elliott amended their agreement to moot Boots’ claims by eliminating limits on Board and committee size, requiring Elliott to vote its shares pro rata with other shareholders at the meeting, and allowing the Board to change its recommendation in favor of the Elliott-selected directors if it determined that its fiduciary duties so required. Notwithstanding this “fiduciary out” (a provision customarily used in connection with target Board recommendations and non-solicitation covenants in the merger context), the court permitted Boots’ challenge to the Board’s agreement to recommend the Elliott-selected directors to go forward.  In response, Elliott waived the recommendation provision entirely, enabling the Board to change its recommendation for any director at any time and for any reason. (The court subsequently vacated its prior expedition order with respect to Boots’ remaining claims).

Before the Delaware Supreme Court could potentially limit Moelis or overturn it on appeal, the Council for the Corporation Law Section of the Delaware State Bar Association (DSBA) rushed to propose statutory amendments to reverse the ruling and reestablish prior market practice. In May 2024, the Delaware Senate proposed DGCL §122(18) to permit corporations to enter into agreements with shareholders that would allow Boards to transfer broad powers to shareholders, including the ability to restrict Board actions, pre-approve Board actions and require the Board to agree to take (or not take) specified actions, as long as the shareholder continues to own a specified number of shares. If enacted, these amendments would clarify the enforceability of shareholder agreements, reducing the uncertainty caused by Moelis.

However, in its haste to overturn Moelis, the DSBA may have taken a sledgehammer to the DGCL where a scalpel was more prudent. Indeed, the proposed amendments as currently written could produce severe, destabilizing effects that the drafters did not intend. Critics argue that these amendments would give Boards the ability to transfer broader powers than those typically involved in settling proxy contests—potentially gutting the protections that shareholders expect when they invest in a Delaware corporation and functionally permitting corporations to de facto opt-out of the corporate form without a shareholder vote.[6] The proposed amendments are slated to be presented for approval by the Delaware Assembly in the next few weeks; if approved, they will go into effect in August 2024, a remarkably short turnaround – even for Delaware.

The Delaware judiciary also upended customary M&A market practices in its decisions in Ap-Fonden v. Activision Blizzard and Crispo v. Musk. In Activision Blizzard, the court ruled that Activision’s Board potentially violated DGCL §251(b) when it approved a merger agreement with some key terms missing and that the Board may not have provided adequate notice of the shareholder meeting to approve the merger. Following common practice, the Board approved a near-final draft of the merger agreement and delegated authority to a Board committee to finalize the agreement. Similarly, in line with other notices, Activision’s special meeting notice listed approval of the merger agreement as an agenda item and attached the proxy statement that included the merger agreement as an appendix. The Delaware Court of Chancery held that Section 251(b) requires Boards to approve an essentially complete merger agreement. The Activision Board did not meet this requirement because the following provisions were missing from the merger agreement approved: (1) the purchase price; (2) the company disclosure letter; (3) the certificate of incorporation of the surviving corporation; and (4) a definite resolution of whether the target could pay dividends between signing and closing. In addition, the court held that Activision’s notice to shareholders was defective because (1) the annexed merger agreement did not include a certificate of incorporation of the surviving corporation (as required by Section 251(b)) and (2) attaching the proxy statement/merger agreement as an appendix did not satisfy Section 251(c)’s requirement to include a brief summary of the merger agreement in the notice.[7]

In Crispo, the Chancery Court called into question the enforceability of “Con-Ed” lost-premium damages provisions, which require a buyer who withdraws from a merger to pay the target the premium that target shareholders would have received if the merger closed. These ubiquitous provisions were added to merger agreements following the Second Circuit’s decision in Consolidated Edison, Inc. v. Northeast Utilities, which held that stockholders had no right to recover lost-premium damages where a merger agreement did not designate them as third-party beneficiaries. Without the threat of such Con-Ed provisions, in the absence of specific performance, many M&A practitioners fear that merger agreements will be turned into mere options for buyers, with a termination fee (almost always lower than the lost premium) as the option price.[8]

The Delaware Chancery Court caused similar whiplash with its Tornetta v. Musk decision striking down a Board-approved executive compensation package for Tesla CEO Elon Musk.[9] The decision was unexpected because the pay package was negotiated by a committee of ostensibly independent directors and approved by 73% of votes cast by unaffiliated Tesla shareholders, which together would ordinarily permit the package to be scrutinized under the more deferential business judgment rule.[10] In rescinding Musk’s $55B package, the court determined that Musk was a controlling shareholder of Tesla, that he unduly influenced the directors determining his pay and that Board conflicts were not fully disclosed to shareholders prior to the vote. Thus, the court determined that the package must be analyzed under the much more rigorous entire fairness standard, ruled that the package was excessive and unfair to Tesla’s shareholders, and determined that rescinding the package was the most appropriate remedy.[11]

Following these rulings, legal commentators have debated whether Delaware is still the best place for corporations to incorporate. Delaware has been viewed by many as the preferred jurisdiction for corporate law because of its reputable courts overseen by experienced judges with corporate experience, voluminous precedent, lack of jury trials, balance between maintaining shareholder rights while empowering the Board and management to make business decisions without undue interference or risk of liability, and a legislature with a vested interest in ensuring their state’s corporate code remains the established leader. However, the rash of recent decisions upending market practices and the legislature’s kneejerk response to allow for private ordering of governance arrangements that threatens Delaware’s traditional Board-centric regime may prompt corporations and shareholders alike to consider other jurisdictions for incorporation.

III. Companies and Other Interested Parties Continue Pursuing Litigation Against the Rule 14a-8 Regime . . .

In January, Exxon Mobil Corporation (Exxon) bypassed the SEC’s no-action process entirely and filed suit in a Texas federal district court to block a shareholder proposal calling for the company to further accelerate medium-term reductions targets for Scopes 1, 2 and 3 GHG emissions. The same proposal went to a vote (and failed) at Exxon’s 2022 and 2023 annual meetings, so the company’s reaction to the 2024 proposal represents a clear shift in strategy.

Proponents Arjuna and Follow This subsequently withdrew their proposal, promised not to resubmit the proposal in future years and moved to dismiss the case for lack of jurisdiction.  Exxon refused to drop its suit, arguing that the proponents should not be able to moot the case by withdrawing when they could resubmit a substantially similar proposal in the future.  (Exxon had good reason to think the proponents would resubmit—they targeted Exxon with 11 shareholder proposals in a 14-year period). Thus, Exxon sought a declaratory judgment that it could exclude the proposal under the ordinary business or resubmission exclusions. The court recently dismissed the case against Netherlands-based Follow This, but allowed the complaint against Arjuna to continue, accepting Exxon’s argument that Arjuna could resubmit a similar proposal in the future.  Arjuna responded with a letter that broadly stipulated that Arjuna would not resubmit the GHG proposal or any similar climate change proposal to Exxon.

The case has drawn attention from both sides of the ESG debate. Governance-focused investors, including shareholder proponents and pension funds, expressed their dissatisfaction with Exxon’s aggressive tactics. The New York State Common Retirement Fund and CalPERS announced that they would vote against 10 of 12 Board members and Exxon’s entire 12-member Board, respectively, at its 2024 annual meeting. CalSTRS similarly opposed the election of two directors.

In contrast, the Chamber of Commerce and Business Roundtable filed amicus briefs siding with Exxon, arguing that special interest groups have hijacked Rule 14a-8 to advance their ideological agendas, which are often at-odds with shareholder interests in maximizing long-term value. In addition, in response to the campaigns described in the paragraph above, a group of 21 state financial officers from 19 right-leaning states submitted a letter to BlackRock CEO Larry Fink urging BlackRock to continue supporting all 12 of Exxon’s nominees.

Ultimately, these campaigns did not move the needle; all but two directors received more than 94% of votes cast at Exxon’s 2024 annual meeting, the CEO received 91.6% of votes cast and the Lead Director bore the brunt of the dissent but still received 87.1% of votes cast.

In addition, as previously detailed in our last article in these pages, the National Association of Manufacturers has intervened in a 14a-8 proposal dispute between Kroger Co. and the National Center for Public Policy Research to argue that the entire 14a-8 regime is unlawful under the First Amendment and the securities laws. Oral arguments were heard at the Fifth Circuit on March 5, 2024. We expect that companies and shareholder proponents alike will eagerly await the Fifth Circuit’s decision, as it may eliminate one of the most common mechanisms for shareholders to present proposals at public companies.

IV. But Shareholders Are Utilizing Alternatives to the Rule 14a-8 Proposal Process

Perhaps anticipating the threat to the Rule 14a-8 shareholder proposal process, some shareholders have used alternative means to solicit other shareholders in support of, or against, proposals to be presented at annual meetings.

The most notable alternative deployed this year is the shareholder proposal campaign initiated by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) and United Mine Workers (UMW) (together, the “Unions”) for Warrior Met Coal, Inc.’s (HCC) 2024 annual meeting. The Unions submitted five proposals to shareholders by sending their own materials in accordance with SEC Rule 14a-4. Rather than request HCC include a proposal in HCC’s proxy statement via Rule 14a-8, the Unions filed their own proxy statement that included the five proposals to present at the annual meeting[12], one of which the HCC Board ultimately endorsed[13]. The Unions did not nominate any candidates to the Board, nor did they seek discretionary authority to vote on any matters that could arise at the meeting. Ultimately, two of the Unions’ five proposals were adopted at the meeting.[14]

The Rule 14a-4 process potentially confers several advantages. Whereas Rule 14a-8 only permits proponents to submit one proposal, there is no limit to the number of proposals a proponent can submit to shareholders via Rule 14a-4. In addition, Rule 14a-8 only allows for a supporting statement of up to 500 words. There is no word limit for proposals submitted via Rule 14a-4 and the company is not permitted to include an opposing statement in the shareholder proponent’s own proxy statement. The Rule 14a-4 process also avoids the potential that a company could exclude a proposal via the various exclusions set forth in Rule 14a-8.

The primary disadvantage of the Rule 14a-4 process is that a proponent must pay to send its proxy materials to shareholders. The proxy rules require that a Rule 14a-4 proponent solicit at least a majority of the voting power (assuming they are not soliciting on behalf of any director nominees), a requirement that has been perceived to require a significant financial commitment to pursue. However, the Unions met this requirement by disseminating their materials via notice and access for an estimated $15,000. For companies with a relatively concentrated shareholder base where notice and access is available, the costs of a Rule 14a-4 solicitation could be significantly cheaper than previously thought.

Another purported disadvantage of the Rule 14a-4 process is that the company is not required to include the proponent’s proposals on its own proxy card. Nevertheless, HCC included the Unions’ proposals on its proxy card, ensuring that such proposals would be seen by all shareholders. Why do so? Most likely because if HCC had not included these proposals on its own card management would have little insight into how much support the Unions’ proposals had obtained and whether enough votes had been cast to obtain a quorum at the meeting.

We have also seen the emergence of what we call the wolfpack notice filing. Pursuant to Rule 14a-6(g), shareholders who hold over $5 million of a company’s shares may issue a statement persuading other shareholders how to vote on certain proposals as long as the shareholder does not solicit proxy cards themselves and such statements are filed with the SEC as notices of exempt solicitation. Shareholders not meeting the $5 million threshold and other interested parties may voluntarily file such statements as well, and many do so since the SEC’s EDGAR system acts as cheap and efficient means to widely disseminate a message to shareholders. For this reason, notices of exempt solicitation have been a popular method for individual proponents to voice their opinions on proposals. While these filings have often been used by proponents acting alone, these notices have been utilized recently in several high-profile solicitations to canvas multiple shareholders with similar ideological preferences to speak with one voice about a proposal or topic of interest.

The most prominent wolfpack notice filing this year occurred at Tesla, where the New York City Comptroller’s Office (NYCCO), together with the SOC Investment Group and Amalgamated Bank, among others, urged shareholders to reject the ratification of CEO Elon Musk’s pay package. This filing and the group’s “vote no” campaign was explicitly discussed in ISS’s and Glass Lewis’s reports on the pay package, highlighting the impact the filing had on the debate surrounding the pay package. The NYCCO made a similar filing at Exxon with several prominent unions and the treasurers of several states, among others, urging shareholders to vote against two of Exxon’s directors in response to Exxon’s lawsuit against Arjuna (discussed in Section III above). Like Tesla, this campaign caught notice of the proxy advisors, and Glass Lewis determined to recommend against an Exxon director because of the company’s litigation tactics against Arjuna.

There have also been other less prominent examples of these wolfpack notice filings this year. Friends Fiduciary, an investment manager that embraces Quaker values, has made exempt solicitation filings on behalf of larger shareholder groups at AbbVie Inc., Eli Lilly and Company, and Texas Instruments Inc. to support shareholder proposals related to patents and product misuse. Other proponents have filed exempt solicitation notices in conjunction with a shareholder proposal they had also submitted, providing additional support for the proposal beyond the 500-word supporting statement included in the company’s proxy statement. The Shareholder Association for Research and Education (SHARE) has filed such notices of exempt solicitation on behalf of like-minded proponents at Tesla, Amazon.com, Inc., and Alphabet, Inc.[15]

The re-discovery of the Rule 14a-4 process and the uptick in wolfpack notice filings indicates that even if the utility of Rule 14a-8 diminishes, or disappears completely, due to the attacks discussed in Section III above, shareholders have other cost-effective means available to offer proposals, make impactful statements on impending proposals, and effectively solicit other shareholders.

  V. The Rise of Labor’s Influence in Corporate Campaigns

In our last article for these pages, we discussed the Strategic Organizing Center’s proxy contest at Starbucks Corporation, then yet to conclude, and speculated whether other labor unions would employ UPC director contests as part of a corporate campaign strategy to further their labor organization objectives. That contest ultimately resulted in a “win” for both parties: the Strategic Organizing Center withdrew their nominees but only after Starbucks had agreed to a collective bargaining framework with Starbucks Workers United. As we review the 2024 proxy season, this contest was one of several public corporate campaigns orchestrated by organized labor to pressure to management and achieve their desired results.

While not acting in an activist role, labor was a critical constituency that each side lobbied in the proxy contest at Norfolk Southern Corporation. Early on, management positioned itself as defending labor by arguing the dissident’s plan for change would result in employee furloughs, touting the company’s improved safety record under current management, and highlighting their new COO’s prior experience working for a union. That strategy appeared to win the desired support at first, as the AFL-CIO released a letter publicly supporting management’s nominees. However, not long after the Brotherhood of Maintenance of Way Employes Division of the International Brotherhood of Teamsters (BMWED Teamsters) and the Brotherhood of Locomotive Engineers and Trainmen (BLET), which collectively represented approximately 50% of NSC’s unionized workforce, announced their support for the dissident’s nominees. In response, NSC management accused the dissident of entering into a memorandum of understanding with BLET that purported to offer BLET certain concessions should the dissident gain control of the company in violation of the Railway Labor Act. Notably, each of ISS’s and Glass Lewis’s reports on the proxy contest acknowledged the BMWED Teamsters’ and BLET’s endorsement for the dissident in their analysis to support their respective recommendations in favor of the dissident’s nominees.

Proxy contests were not the only significant corporate campaigns that labor participated in this proxy season. In the case of the potential merger between US Steel and Nippon Steel, a labor union emerged as a political force with the power to potentially convince the US government to block the deal during a pivotal election year. Prior to announcing a deal with Nippon Steel, the United Steelworkers had supported a bid from Cleveland-Cliffs, a US-based company, to purchase US Steel, with the union going so far as to assign Cleveland-Cliffs its right to bid for US Steel under its Basic Labor Agreement with the company. When the Nippon Steel deal was announced the United Steelworkers issued a statement denouncing the agreement and urged government regulators to scrutinize the deal. Sure enough, in the weeks that followed a bi-partisan coalition of US Senators, including Sens. John Fetterman (D-PE), Bob Casey (D-PE), Joe Manchin (D-WV), Sherrod Brown (D-OH), J.D. Vance (R-OH), Noah Hawley (R-MO) and Marco Rubio (R-FL), objected to the Nippon Steel deal and urged federal regulators to block it. Shortly thereafter, the White House announced that it would review the deal’s impact on national security and supply chain reliability. Both Presidential candidates have supported the United Steelworkers as well. President Biden issued a statement that “it is vital for [US Steel] to remain an American steel company that is domestically owned and operated” and Donald Trump insisted that he would block the deal in a meeting with the Teamsters union. As of this writing, the Department of Justice has made a second request for information about the deal and the Committee on Foreign Investment in the United States is conducting a national security review.

In addition, as described in Section IV above, the SOC Investment Group and Amalgamated Bank, a well-known labor ally, filed notices of exempt solicitation with other proponents in opposition to Elon Musk’s pay package at Tesla and against two directors at Exxon in response to a shareholder lawsuit against another shareholder proponent.

This year’s campaigns highlight how labor has emerged as a stakeholder with significant power to influence the outcome of proxy contests, mergers, votes on shareholder proposals, and other corporate campaigns. We expect that these campaigns will embolden labor to continue to exert pressure on companies to leverage their power and obtain valuable concessions for their members.

Conclusion

Surprise, unpredictability, new tactics and responses, and a new(ish) player – 2024 has been more eventful than most recent years. We wait with bated breath for what the rest of the year will bring.

Endnotes:

1 The ISS and Glass Lewis recommendations for NSC did not completely overlap. ISS and Glass Lewis only recommended for four of the same dissident nominees. ISS recommended in favor of one dissident nominee that Glass Lewis did not recommend, and Glass Lewis recommended in favor of two dissident nominees that ISS did not recommend. There was also dissonance between ISS’s and Glass Lewis’s withhold recommendations. While each of ISS and Glass Lewis recommended withholding on three of the same NSC incumbents, ISS recommended withholding on two NSC nominees that Glass Lewis did not recommend withholding on (including one incumbent who was not targeted by the dissident) and Glass Lewis recommended withholding on three NSC nominees that ISS did not recommend withholding on. These distinctions may have provided NSC’s nominees an advantage by splitting the votes of shareholders who favored the dissident, but who could not agree on which dissident nominees should be elected and which NSC nominees should be voted out.(go back)

2See our prior analysis in these pages here. The dissident at NSC, Ancora, was eager to place the blame on passive investors for only electing three of their nominees to the NSC Board. In a speech made at NSC’s annual meeting, Jim Chadwick, Ancora’s representative, went as far as to prospectively blame NSC’s passive shareholders who voted against Ancora’s candidates for future incidents at the company that could harm the general public and shareholders alike. Unsurprisingly, these remarks caught the attention of NSC’s shareholders. According to an interview given to the 13D Monitor by Donna Anderson, Vice President and Head of Corporate Governance at T. Rowe Price, such “intemperate remarks . . . reflected very poor judgment” and that she would “take [them] into account the next time we see this investor come into a company in one of our positions.”(go back)

3The agreement required that the Board nominate and recommend that shareholders vote for the controlling shareholder’s director nominees and allowed the shareholder to designate new directors to fill Board vacancies upon the departure of his designated director(s), limit the size of the Board and determine the composition of Board committees.(go back)

4For example, the shareholder’s pre-approval was required before the Board issued stock, declared a dividend, incurred debt, appointed or removed specified officers, entered into a merger, or approved the annual budget.(go back)

5When a corporation IPOs, the charter provisions are clearly set forth for shareholders to review prior to investing, giving shareholders the ability to “vote with their feet” if the charter does not adequately protect minority shareholder rights. In medias res, charter amendments typically require the approval of holders of at least a majority of the corporation’s outstanding shares, which necessitate fulsome disclosure and presentation at a shareholders’ meeting or in a written consent, similarly providing minority shareholders with transparency and the opportunity to vote the amendments down. In contrast, Boards typically enter into shareholder agreements without providing advance notice to shareholders or soliciting shareholder approval.(go back)

6See articles in these pages from Lucian Bebchuck, Edward Rock/Marcel Kahan and Sarath Sanga/Gabriel Rauterberg/Eric Talley for an overview of these criticisms.(go back)

7In response, the DSBA proposed amendments to (i) allow Boards to approve agreements in “substantially final” form or ratify the agreement post hoc when it is filed with the Delaware Secretary of State and (ii) specify that a shareholder meeting notice incorporates any document appended to such notice.(go back)

8Again, springing into action, the DSBA proposed amendments to clarify the enforceability of lost-premium provisions if a buyer breaches the merger agreement and fails to close the transaction.(go back)

9To earn the package, Musk also excessively enriched Tesla shareholders, increasing Tesla’s market capitalization by $735 billion.(go back)

10In Firefighters’ Pension System of the City of Kansas City, Missouri Trust v. Foundation Building Materials, Inc., the Delaware court similarly found that a special committee of independent directors deferred to the controlling shareholder in negotiating a sale of the company, and that the proxy statement omitted material information about the controlling shareholder’s interests in the transaction and its relationships with financial and legal advisors to the company, such that the process did not remove the transaction from heightened judicial review.(go back)

11In response, Tesla formed another independent committee that conducted a thorough review of the compensation package and presented it to shareholders for ratification, along with extensive disclosure, including a copy of the court’s opinion. Shareholders ratified the original package with approximately the same level of support as in the 2018 proposal.(go back)

12The Unions proposed that the HCC Board adopt: (1) a policy to require stockholder approval of “poison pills,” (2) a “proxy access” bylaw provision, (3) a policy to require stockholder approval of the use of “blank check” preferred stock for antitakeover purposes, (4) a policy to require stockholder approval of “golden parachutes,” and (5) an independent, third-party assessment of the Company’s respect for workers’ international human rights of freedom of association and collective bargaining(go back)

13The HCC Board recommended that stockholders approve the proxy access bylaw proposal.(go back)

14HCC stockholders approved the poison pill proposal and the proxy access bylaw proposal.(go back)

15For example, the coalition of proponents for SHARE’s exempt solicitation at Amazon.com, Inc. endorsing a freedom of association proposal included: Catherine Donnelly Foundation represented by SHARE, Fjärde AP-fonden (AP4), E. Öhman J:or Fonder AB, Storebrand Asset Management, KLP Kapitalforvaltning AS, Kapitalforeningen MP Invest, Tredje AP-fonden (AP3), Alecta Tjänstepension Ömsesidigt, CCLA Investment Management Limited, the Folksam Group, Kapitalforeningen Sampension Invest, Andra AP-fonden (AP2), SOC Investment Group, Amundi Asset Management, PensionDanmark, Första AP-fonden (AP1), the Bright Start College Savings Trust, Cardano Risk Management B.V., NEI Investments, Merseyside Pension Fund, Nordea Investment Management AB, and the Greater Manchester Pension Fund.(go back)