Boards of Directors

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As expected, 2014 proved to be a challenging year for boards.  The legal and economic environments continued to grow more complex, and directors faced increasing scrutiny from investors and governmental authorities in the forms of market reaction, shareholder activism, litigation and enforcement and regulatory activity.  We expect these trends to continue, and boards will need to remain extremely proactive in their oversight and involvement in 2015.
Continue Reading Selected Issues for Boards of Directors in 2015

Directors of public companies are increasingly facing pressure from hedge fund and institutional stockholders to engage in accretive combinations with competitors.  But they must balance this pressure against the willingness of antitrust regulators in the United States, Europe, China and beyond to delay transactions and either require significant divestitures or conduct remedies or just block these combinations outright. 
Continue Reading Delaware Chancery Court Provides Guidance on Fulfillment of Fiduciary Duties When Evaluating Antitrust Risk

On May 2, 2014, the Delaware Chancery Court denied a motion to preliminarily enjoin Sotheby’s annual stockholder meeting based on allegations by an activist stockholder, Third Point LLC, that the Sotheby’s board of directors violated its fiduciary duties by adopting a rights plan (or “poison pill”) and refusing to provide a waiver from its terms in order to obtain an advantage in an ongoing proxy contest. 
Continue Reading Rights Plans and Proxy Contests: Chancery Court Denies Activist’s Motion to Enjoin Sotheby’s Shareholder Meeting

When the directors of a public company lose confidence in their chief executive officer and choose to remove him or her, the communication of that message is typically a highly choreographed affair.  A recent decision of the Delaware Supreme Court, sitting en banc in Klaassen v. Allegro Development Corp., provides the opportunity to review some basics of Delaware board process and highlights the need to be careful about both a Delaware law technicality involving the difference between regular and special board meetings, and what should be a more common sense aversion to the use of deception in the choreography. 
Continue Reading Terminating the CEO: Some Practice Tips from the Delaware Supreme Court

On March 11, 2014, the Conference Board released results of its year-long multifaceted study of corporate/investor engagement.  The topic encompasses practical and systemic issues of critical importance to public companies and investors, which in the long term will impact U.S. macro-economic performance.
Continue Reading The Conference Board Governance Center Task Force on Corporate/Investor Engagement

Over the past year, boards of directors continued to face increasing scrutiny from shareholders and regulators, and the consequences of failures became more serious in terms of regulatory enforcement, shareholder litigation and market reaction. We expect these trends to continue in 2014, and proactive board oversight and involvement will remain crucial in this challenging environment.
Continue Reading Selected Issues for Boards of Directors in 2014

At its open meeting on August 13, 2013, the Public Company Accounting Oversight Board (“PCAOB”) proposed two new auditing standards that would significantly affect the role auditors play in providing information about public companies to investors and other users of financial statements.  The two new proposed auditing standards are:
Continue Reading PCAOB Proposes Significant Changes to Auditor’s Reports and Related Auditor Responsibilities

The multiplicity of cases brought on behalf of the same stockholder group (or as derivative actions) against the same defendants based on the same conduct and asserting the same fiduciary duty claims is now well documented. The benefits of consolidating such litigation in a single forum have also been well established.
Continue Reading Enhancing the Promise of Exclusive Forum Clauses by Having Stockholders Consent to the Jurisdiction of the Selected Forum

In a much anticipated decision, the Delaware Chancery Court upheld on June 25, 2013 the validity of the forum selection bylaws adopted by the boards of directors of FedEx Corporation (“FedEx”) and Chevron Corporation (“Chevron”). Such bylaws provide that stockholders bringing derivative claims or claims alleging breaches of fiduciary duties, arising from the Delaware General Corporate Law (the “DGCL”) or otherwise implicating the internal affairs of the corporation be brought exclusively in Delaware state or federal courts.
Continue Reading Should Your Company Adopt A Forum Selection Bylaw?

Chancellor Leo Strine’s opinion in In re MFW Shareholders Litigation (Del Ch. May 29, 2013) marks the culmination of an effort by the Chancellor, going back to his lengthy dicta in In re Cox Communications Shareholders Litigation (Del Ch. 2005), to arrive at a more unified standard for review of buy-outs of a company’s public float by a controlling stockholder.  The headline conclusion is that, assuming this decision is not reversed by the Delaware Supreme Court on appeal, controlling stockholder buyouts structured as negotiated mergers may now join controlling stockholder buyouts that take the form of unilateral tender offers in having available a theoretical path that permits challenges to be dismissed on pre-trial motions.
Continue Reading Controlling Stockholder “Going Private” Transactions after In Re MFW: Reasons to Be Wary of the Path to the Business Judgment Rule