Voting - Board response to shareholder initiatives - interference w shareholder voting Flashcards
A board generally cannot undertake action with the primary purpose of ___________ with shareholder voting, even if it acts in the ____ _____ pursuit of the corporation’s ____ interest.
A board generally cannot undertake action with the primary purpose of INTERFERING with shareholder voting, even if it acts in the GOOD FAITH pursuit of the corporation’s BEST interest.
May a board, acting on its good-faith view of the corporation’s best interest, take steps with the primary purpose of interfering with shareholder voting?
No. Despite the general deference to the board’s decision-making under the business judgment rule, any board action that interferes with shareholder voting will be closely scrutinized. The shareholder franchise is the source of the board’s power. When the board restricts shareholder voting, it changes the allocation of power between the board and the shareholders. Ordinarily, agents cannot unilaterally determine the scope of their power vis-à-vis their principal. Therefore, while the board is given broad discretion in making most business decisions, they are far less free to restrict shareholder voting.
