Recent Skirmishes in the Battle Over Corporate Voting and Governance Brett H. McDonnell Conference on The Fall and Rise of Federal Corporation Law Friday, October 13, 2006
Recent Developments SOX 2003 Delaware cases and after SEC proposed shareholder nomination rule AFSCME v. AIG
Conceptual Framework: Our Mixed Federal System State system: high quality, managerialist bias Purely national system: less quality, less bias Mixed federal system: states set basic law, but subject to federal reaction
The Mixed System: Pros and Cons Threat of federal intervention gets Delaware to reduce bias; still benefit from high Delaware quality Sometimes state-only better: Congress incompetent, or too anti-manager Sometimes national-only better: Congress also pro-manager, tolerates too much bias
The Case for Our Federal System: Muddling Ahead SOX gets tougher on managers Delaware responded (Omnicare, Oracle, Disney), also exchanges, SEC All responses advance developing agenda of independent monitors and gatekeepers
The Case for Delaware: Is SOX a Costly Flop? Stock price evidence mixed Arguments over specific provisions Politics of SOX: populist panic, or moment of public interest over special interests? Consider SOX as part of system
The Case for Nationalization: Are We Too Easy on Managers? Delaware slides back after 2003: Omnicare Toys “R” Us Oracle Beam Disney Disney
Shareholder Nominations and Proxy Access SEC’s failed proposed rule A better approach: proxy access bylaws Probably valid in Delaware Excludable under Rule 14a-8? AFSCME v. AIG: less informed and biased court opts for pro-shareholder rule; SEC may overturn, but allows shareholder activists to play defense