This is the second day of the annual gathering of corporate law types in New Orleans and this is my third update on the seminar. The panel this morning is entitled: " M & A and the Media". Among those on the panel includes reporters from The Wall Street Journal and The New York Times. The panel discussed the need to be aware of what is being said in the blogosphere, as the latest news in often reported there first. The question was asked about why the media (particularly the mainstream press) did not "identify" or "report about" the underlying problems that led to the current economic crisis–before the crash. In my view, the answers to that question from the panel did not satisfactorily address that burning issue.

I’m blogging live from the 21st Annual Tulane Corporate Law Institute, a two-day seminar on corporate law that brings together scholars, practitioners and judges who want to  explain, and to learn about the latest developments in corporate law. There is always a large contingent of Delaware lawyers and judges. I will only be posting about selective and subjective tidbits that I think would be of the most interest to those who read these pages looking for the latest updates in Delaware corporate law. Several others are also blogging this seminar today, e.g., here and here.

One of the morning panels was titled: “Shareholder Activism, Board Governance and the Role of State Law in the Age of Uncertainty.” Moderators of the panel were David Katz of Wachtell Lipton and Faiza Saeed of Cravath, Swaine and Moore.

Among the panel members are Delaware Supreme Court Chief Justice Myron Steele.
The topics addressed by the panel included:

“The Role of Delaware v. ‘Federal’ Corporate Law”.

The Chief Justice suggested that the future role of state law  in corporate governance ultimately will be determined by the Federal government. [Note that this is not an official transcript and this post is the result of my notes that may not be a complete summary of the presentation by any panel member.]
His Honor said that Delaware’s approach is to find a balance between accountability and authority, and to allow shareholders and directors to talk about what improvements can be made on an incremental basis. My take on a few other soundbites from His Honor follow:
• His is concerned that the changes at the federal level will be the result of a frenzied race to make some change without the application of thoughtfulness. His preference is to allow the states to continue to lead the change.
• He mentioned a reference to a seminar last week at Notre Dame Law School where a panelist mentioned a federal statute that could be used to impose criminal liability for breach of fiduciary duty. One of the concerns is the lack of consistency in an approach that allows the many federal courts to define fiduciary duty according to 1,300 different federal district judges’ views in applying, potentially, the different definitions from one or more of the 50 states on fiduciary law.
• He said that a board is entitled under Delaware law to consider other constituencies, such as the community impact in a merger context, as long as they document their reasons, even though Delaware does not have a statute like some other states have, that expressly allows a board to consider the community.
• In reply to a question, His Honor  expressed his personal hope that before acting too hastily, Congress would consider whether the systemic failure experienced in the financial markets and other sectors of the economic downturn, is due to corporate governance problems or whether it is more a problem of faulty federal regulation–or simply inappropriate, excessive risk-taking.
 

We have referred to Delaware legislative developments regarding benefit corporations previously on these pages, but a recent article in Forbes provides helpful background information about the history and genesis of the Delaware statutory provisions regarding this rather new aspect of Delaware corporate law. The article features a prominent Delaware lawyer who is a major player in promoting benefit corporations. In essence, the relatively new statute allows a corporation to be formed in order to have as its legitimate and explicit purpose more than only the maximization of profit for stockholders. The article linked above should be of interest to anyone who wants to know more about this developing topic.

An all-day seminar yesterday at Widener University Law School featured leading members of the judiciary as well as practitioners and academics who proposed changes to Delaware corporate  law on (or about)  the 40th anniversary of the last major overhaul of the Delaware General Corporation Law in 1967 (although minor updates have been made each year since then.)  Unlike most other jurisdictions, Delaware recognizes practitioners and academics from other states as  being well-versed enough about Delaware law that their opinions are respected in terms of their suggestions for changes in our law. Indeed, the last major revision in 1967 of the DGCL was done under the scholarly direction of University of Virginia Law Professor Ernest Folk.

Here is a post I did recently on the current issue of the Delaware Lawyer magazine which contains articles with many suggested changes by several of the panel members at yesterday’s seminar.

Here is a list of the topics covered at yesterday’s seminar along with the panel members’ names and an overview of the purpose of the seminar.

I am attempting to provide a link to the materials because the volume of topics addressed is too much to cover in a blog post, but among the suggestions I though most notable were those made by Ted Mirvis of the Wachtell Lipton firm in New York, who proposed 2 changes to the DGCL as follows (and I am only paraphrasing):

1. All claims related to the DGCL or regarding fiduciary duties, shall be brought in the Delaware Chancery Court; and

2. Rulings regarding the exercise by directors of their fiduciary duties in change of control cases should be contextual only and should not be the subject of a per se rule.

Professor Faith Stevelman Kahn of New York Law School suggested that for policy reasons, a mandatory forum selection clause would not be advisable–even if permissible by applicable law to do so.  Professor Elizabeth Nowicki of Tulane University Law School argued that Section 102(b)(7) should be "gutted" (my word) in order to give directors a negative incentive (or in her words, "fear of punishment") that would scare them into better observance of their duties.

During a luncheon speech, Vice Chancellor Leo Strine, Jr. provided insights during a 40-minute presentation that I cannot do justice to in the short space appropriate to this forum, but one nugget I wrote down in my notes (and this is only a paraphrase that runs the risk of being taken out of context), is his suggestion that even though Congress has the authority to increase their regulation of corporate governance, they should not engage in "selective intervention" into the corporate governance arena while still leaving the hard work to the states of enforcing fiduciary duties on a case-by-case basis.

Many other luminaries offered suggestions about how to change the DGCL to keep up with the global competition in the 21st Century, and I hope to add more details about the symposium later.

As a follow-up to my posts from yesterday, this is my last post from the two-day seminar at the Tulane Corporate Law Institute. One of the benefits for the 250 attendees at this New Orleans venue, is the further clarification and direction for corporate practitioners provided by members of the Delaware Chancery Court and Delaware Supreme Court who are on the panels at this seminar along with other leading lawyers from around the country who labor in the vineyards of Delaware corporate governance. Remember that these comments by members of the judiciary are "off the record" and do not represent the official position of the courts on which they sit, but nevertheless for those who need to understand the formal opinions of these courts, such commentary is akin to manna from heaven.

One other "added value" of the seminar is the intangible positive impact from the interaction "on a personal level, without discussing cases" of the members of the judiciary who attend, with the lawyers from around the country who often appear before the Delaware courts. Some of the "Delaware-bashing" commentators who criticize judges who participate in scholarly colloquia or write and participate in the development of the law outside of their judicial opinions, miss at least one point. There is a demonstrable increase in professionalism and efficiency when lawyers and judges gather outside the courtroom on a personal level and get to know each other on a collegial basis. This interaction, on a human level, makes it easier and more enjoyable to work with people, even if they are lawyers on opposite sides of a case.

Former Chancellor William Allen, who is now a professor at New York University Law School and also on the faculty of their Stern School of Business, was on a panel this morning and gave his perspective of Delaware corporate law about 20 years ago, prior to 1985. At that time, former Chancellor Allen explained, things were much simpler and there were two basic principles that governed the analysis of director conduct, for example, in the context of mergers and acquisitions. The two basic governing principles were: (i) the fiduciary duty concept that any self dealing by directors or controlling shareholders would be subject to a much higher level of scrutiny and a shifting of the burden of proof; and (ii) the Business Judgment Rule that provides that the court will not second-guess a board’s decision if the circumstances justify the presumption that their decision was made on an informed basis, in good faith and in the best interests of the company. Then, if 1985, came the decisions in Van Gorkom, Unocal and Revlon, which heralded a much more nuanced and multi-layered range of standards to review directors’ actions.

Chief Justice Myron Steele of the Delaware Supreme Court was also on a panel this morning and his  "off the record" remarks were also illuminating. He reminded those gathered that for purposes of corporate governance (as compared with LLCs, for example), there are three bedrock principles that are fundamental: (i) the Delaware General Corporation Law which provides at Section 141(e) that the directors manage the corporation; (ii) the shareholder franchise is sacrosanct (my word) and will be vigorously protected; and (iii) all cases are factually-based, and the facts cannot be separated from the decision of the courts. He also remarked that practitioners found it helpful when the members of the judiciary present at seminars and shed light on less clear areas of the law–for the benefit of lawyers–and other judges– who need to know what that law is so that they can advise their clients on what the law is and what standards judges will use to decide issues presented to them. Another panel discussed MAC clauses, and one of the members of the Chancery Court suggested that in the current environment it was likely that there would be more "deal certainty" which of course will impact the price of the particular deal.