Today’s Wall Street Journal has a thought-provoking cover page story on the increasing habit of hedge funds and others that involves borrowing of shares just before a record date in order to be able to vote at a shareholders’ meeting, and then returning the shares after the meeting. The article notes that due to confusion, perhaps, the vote counters have been known to let both borrowers and owners vote the shares. This raises a host of corporate law issues that I am sure will be explored more thoroughly here and elsewhere in the months to come. Here is a link to the WSJ article: WSJ.com – Login
Prof. Larry Ribstein has a scholarly commentary on the matter on his blog. Here is an excerpt:
Note that Delaware law allows voting borrowed shares, and shareholders’ agreements with those who hold their shares don’t bar it. Why is that? One reason could be that big shareholders actually make a lot of money from lending their shares. The article notes that CalPers made $129.4 million.
Here is a link to his entire post in which he provides sources to other scholarly thoughts on the topic.