Shareholder Voting Flashcards
SHs have rational apathy meaning that it’s rational for them not to ___
spend time/resources learning about complex issues at stake
Proxy advisory firms have emerged to help _____ overcome the costs ____
institutional investors, gathering info necessary to make decisions on SH votes
A proxy statement informs SH about ___
terms of a business to be voted on
Proxy is the power of attorney to __
allow company’s designee to vote the shares owned by a SH
3 reasons the BOD solicits and pays for proxies
- ensure a quorum
- prevent a “coup” from minority SH
- SEC requires it
The BOD decies which _____ appear on company’s proxy card with the exception of ___
proposals/nominees, 14(a)(8)
What does 14a8 allow
SH to submit certain proposals
Under 14a8, a SH must have ___
certain number of shares for certain amount of time
14a8 does not cover in particular ___
director elections or anything directly affecting upcoming election
The only means for a dissident SH to propose alternative board candidate is to ___
file separate proxy statement to initiate a proxy fight
Proxy fights are rare because ___
so costly (only reimbursed if you win)
Proxy access can enable dissident SHs to __
nominate own nominees without proxy contest
Proxy access depends on
corps bylaws/charters
SH proposals are ___
requests made by SH included in the company’s annual meeting agenda
___ generally have agenda control
Directors
SH proposals increased driven by rise in ___
executive compensation proposals and environ/social proposals
Policy behind director agenda control is that SHs can __
exit if they don’t like something
Under the new Unocal, the BOD has broad discretion over most decisions but not so much with ___
SH voting
Interfering with SH voting is frowned upon because it ___
changes allocation of power between BOD and SHs
Unocal is no longer exclusively tied to __
takeover threats
Under the new Unocal it can also be used to asses the legality of __
interfering with SH enterprises
New Unocal cases
- Blasius
- Schnell
- Coster
Under the new Unocal saying price is too low is not __
forever defense for keeping pill in place
Williams says that 5% trigger for a pill ___
is no-start, SH activism
Williams altered proportionality by moving towards ___ as crucial factor even if defense measures not __
range of reasonableness, preclusive/coercive
Williams rejected idea that directors could justify actions by claiming ___
knew better than SH about board composition
Williams decision is a substantial shift away from __
concept of substantive coercion
Blasius required that directors provide ___
compelling justificatio nfor defensive tactics when primarily interfering with SH
Coster impact on Unocal
folded Blasius standard (compelling justification) into Unocal analysis
Schnell key facts
BOD invoked new provision to move annual meeting to thwart proxy fight
Schnell rule is that directors may not act with ___
sole purpose of obstructing SH action even if methods legally permissible
DGCL 211 says that directors determine ___
when and where to hold annual meeting
Schnell held that directors may not take steps designed to ___ even if ___
perpetuate power at SH expense, permitted by statute
Schnell held that ___ are particularly important
SH elections
In Schnell, changing the date was inequitable because __
in effect total obstruction of dissident SH efforts
Unocal standard vs. Blasius standard
reasonably perceived threat vs. compelling justification
Blasius (Atlas SH) proposed that Atlas __
sell assets and distribute large one-time dividend
Atlas directors thought __
Blasius plan would genuinely harm corporation
When Atlas BOD expressed didn’t like Blasius proposal, Blasius ___
formalized proposal + requested election 8 new BOD
In response to Blasius BOD election proposal, Atlas BOD __
amended bylaws to add two more BOD
Blasius held that BOD cannot take action with ___
primary purpose of interfering with SH even if good faith pursuit of corporate interest
Atlas decision to expand BOD was statutorily allowed but inequitable because __
express motive to prevent Blasius from getting control of BOD in immediate future
What should Atlas BOD done instead?
use corporate $ to educate SH on Blasius negative effects
Coster was mad because the UIP BOD responded by __
issuing stock to long-time employee diluting Coster’s ownership
Coster held that entire fairness was ___
insufficient given large interference with Coster voting rights as half owner
Coster holds that Unocal is __
applicable because response to a threat
What was the threat in Coster?
Custodian would give rise to termination rights in Ks and threaten revenue stream
Coster held that UIP board did not act inequitably because it ___
had compelling justification
What were the reasons for compelling justification in Coster
- issue stock cemented relationship with critical employee
- custodian would threaten revenue and Ks
What was Williams ground for 5% pill?
generalized concern about stockholder activism in market uncertainty
The pill in WIlliams was designed to deal with ___ NOT ___
stockholder activism, takeover threat
What was WIlliams BOD concern about SH activism?
SHs would pursue short-term agendas without caring about long-term company health
Trinity v. Walmart proposal rejected was that Walmart ___
adopt policy not to sell guns with high capacity magazines
A company can generally exclude SH proposal if relates to ___
ordinary business operations
Trinity case held that Walmart could exclude because __
heart of retailer business to decide which products to sell
Trinity held that sale of high-capacity guns is ____ BUT ___
significant social policy, doesn’t transcend day to day operations
Under 14a8 company cannot exclude proposal if its focus is a matter __
of significant social policy
+
goes beyond day to day business
