Jamesian Philosophy Refreshed

The Delaware Chancery Court issued an important decision early this month (May 5th), allowing Sotheby's to proceed with its annual stockholders' meeting the following day. The significance of that? -- the court is taking a laissez-faire attitude toward a new more aggressive use of the "poison pill" by corporate boards. A "poison pill" in corporate law is the colloquial term for certain shareholder rights plans devised back in the 1980s to make hostile takeovers more difficult. Typically, a plan will provide that when a particular shareholder owns more than some threshold percentage of the equity (say, 15%), there will be a new issuance of shares, to the other shareholders, at a discounted price. The block of shares that puts the potential trouble maker over the 15% mark then, is in two senses "poisoned." It dilutes the value of his equity (for the obvious supply/demand reason) and it significantly lessens  the trouble maker's weight...

In June 2006 the Supreme Court of the State of Delaware handed down a decision on the duties that members of a board of directors owe to the stockholders. Because of the high-profile boardroom fighting behind the decision, and of course the famous name of the company, this decision is better known than are many equally-important corporate and securities law decisions: Yet  In re Walt Disney Co. Derivative Litigation has a good deal of significance even aside from all that. A major New York corporate-law firm, Wachtell Lipton , recently mailed its various corporate clients a "Compensation Committee Guide," explaining how they can determine the salaries, perqs, etc., of their Big Shot executives with minimal litigation blowback. It intrigues me that in a 2013 pamphlet prepared for this purpose, a 7-year-old Disney case, something that happened before the great financial crisis, before Dodd-Frank, before the recent say-on-pay litigation, still has to be given and is giv...