I am blogging today while attending the meeting in Washington, D.C., of the Business and Corporate Litigation Committee of the ABA’s Business Law Section. I am attending a panel discussion called: Institutional Investors: The Sleeping Giants or Shrugging Altases of the Corporate Democracy Debate? The panel includes Delaware Supreme Court Chief Justice Myron Steele; Prof. Larry Hamermesh; Hedge Fund Manager William Ackman of Pershing Square Capital Management, L.P.; Moderator Rolin Bissell of Young Conaway, Wilmington; Amy Goodman of Gibson Dunn, D.C.; Trevor Norwitz of Wachtell Lipton, NY; John Wilcox of TIAA-CREF and Ann Yerger of the Council of Institutional Directors.
Prof. Hamermesh noted that most commentators agree that the common goal of corporate governance is maximizing shareholder wealth. John Wilcox observed that the $380 billion in assets that TIAA-CREF manages is concerned with long-term as opposed to short-term profit.
Chief Justice Steele provided comments about the recent Stone v. Ritter (2006 LEXIS 597 (Del. November 6, 2006)), decision of the Delaware Supreme Court. His Honor referred to that decision as making clear that good faith is not a stand-alone duty, but is a part of the duty of loyalty. Moreover, that decision–as mentioned on this blog here when the case was released–also addressed Caremark (In Re Caremark Int’l Inc. Deriv. Litig., 698 A.2d 959, 971 (Del. Ch. 1996)), issues and the board’s duty to have a compliance system in place and to monitor that system to check that it is working. Of course, however, the decision reaffirmed that the court will not second guess directors when their actions earn them the protection of the Business Judgment Rule.
The materials handed out at the seminar include a memo dated today, Dec. 1, 2006 from Martin Lipton, in which he advises board members that "the fundamental governance issue confronting corporations in 2007 will be the extent to which shareholders should have the ability to intervene in board actions and influence directors". The panel also discussed the surge in the support of "majority voting" requirements, as compared to plurality, and the memo of Marty Lipton basically says that majority voting requirments are here to stay.
One panel member, William Ackman, suggested some improvments in this area: For example, the record date is often days prior to the meeting date, which means that some shareholders who sell after the record date but before the meeting and thus despite having no stake in the outcome, are still voting at the shareholders’ meeting. Prof. Hamermesh noted that is usually up to the board to determine the record date, and that the statute gives them some flexibility, though in light of modern technology making the "gap" between the record date and meeting date less necessary, it might be a good focus of consideration for the next round of DGCL revisions or updates.