Tag Archives | poison pill

Ford Motor: Proxy Score 53

Ford Motor CompanyFord Motor Company (NYSE:F, $F) manufactures or distributes automobiles across six continents. It is one of the stocks in my portfolio. Their annual meeting is coming up on May 12, 2016. ProxyDemocracy.org had collected the votes of three funds when I checked. Vote AGAINST pay, compensation committee, poison pill; FOR shareholder proposals to transition out of dual class shares and to lower the threshold to call a special meeting. I voted with the Board’s recommendations 58% of the time. View Proxy Statement. Continue Reading →

Continue Reading ·

Netflix $NFLX: Proxy Vote

netflixNetflix (NFLX), is one of the stocks in my portfolio. Their annual meeting is June 9, 2014. ProxyDemocracy.org had collected the votes of three funds when I checked and voted on 6/4/2014.  I voted with management 27% of the time.  View Proxy Statement (why no linked Table of Contents?) Read Warnings below. What follows are my recommendations on how to vote the NFLX proxy in order to enhance corporate governance and long-term value.   Continue Reading →

Continue Reading ·

Review: Law as Engineering

LawAsEngineeringLaw As Engineering: Thinking About What Lawyers Do takes a creative approach to law; instead of seeing law as closely associated with philosophy or economics, David Howarth points to legal design. Most attorneys aren’t involved in litigation. Like engineers, they are often hired to provide services not in the abstract but for particular purposes, mostly to facilitate transactions or deals. Continue Reading →

Continue Reading ·

Netflix Needs Proxy Access – Proxy Score 10 Out of 100

Netflix, Inc. ($NFLX) is one of the stocks in my portfolio. Their annual meeting is coming up on 6/7/2013. ProxyDemocracy.org had collected the votes of one fund when I checked on 5/25/2013. I voted with management only 10% of the time.  View Proxy Statement. NFLX is another supposedly high-tech company with no hyperlinks in their proxy statement. In fact, they don’t even include an index. They either don’t want investors to be able find information or they just don’t care enough to bother. While the stock has risen recently, the company remains risky because of poor corporate governance. Continue Reading →

Continue Reading ·

Netflix: A Candidate for Proxy Access

Netflix Inc. (NFLX),  which has lost half its value in the last two years, adopted an antitakeover plan (poison pill) intended to block activist investor Carl Icahn from expanding his nearly 10% stake. They did so without seeking shareowner approval and the pill may make it harder to find a buyer. Writing for the WSJ, Miriam Gottfried notes, Netflix Pill Should Give Shareholders Pause. Let’s hope shareowners do more than just pause; let’s take action! Continue Reading →

Continue Reading ·

Gilead Sciences (GILD): How I Voted – Proxy Score 44

Gilead Sciences (GILD) is one of the stocks in my portfolio. Their annual meeting is coming up on 5/10/2012. Voting ends 5/9 on Moxy Vote’s proxy voting platform, which listed 8 “good causes,” but three were consolidations, when I checked and voted on 5/8. ProxyDemocracy.org had 4 funds voting.Gilead scores 44 out of 100, since I voted with management on only 44% of the proxy. Continue Reading →

Continue Reading ·

Delaware Chancery Should Refocus

Governance practitioners should be aware of two very recent Delaware Chancery cases which are likely to have a significant effect upon business practices. In the first, Air Products and Chemicals, Inc. v. Airgas, Inc., et al and In re Airgas Inc. Shareholder Litigation, Civ. Act. Nos. 5249-CC and 5256-CC February 15, 2011, the Delaware Chancellor in a well reasoned 158 page discourse containing 514 footnotes, upheld the indefinite use of the so-called ‘poison pill’ takeover defense mechanism against a challenge that it infringed upon shareholder rights to decide for themselves whether to accept an above-market bid for their company. In the second, In re Del Monte Foods Company Shareholder Litigation , Consol. C.A. no. 6027-VCL February 14, 2011, a Vice Chancellor restricted the ability of investment bankers in M&A situations to act as both adviser to the target company and agent for the purchaser in connection with procurement of financing for the same transaction.

Airgas was explained as follows by Chancellor Chandler:

[T]his case brings to the fore one of the most basic questions animating all of corporate law, which relates to the allocation of power between directors and stockholders. That is, when, if ever, will a board’s duty to ‘the corporation and its shareholders’ require [the board] to abandon concerns for ‘long term’ values (and other constituencies) and enter a current share value maximizing mode?

Thus, there should be little doubt as to the legitimacy of the use by a board of a pill to resist a takeover bid, even one which appears to be advantageous to shareholders. Of course, such use requires that directors be genuinely independent and properly informed in connection with their adoption and use of the pill. Prof. Lucian Bebchuck offers an interesting alternative, An Antidote for the Corporate Poison Pill, of avoiding/eliminating classified boards as a way of mitigating the shareholder disenfranchisement caused by the use of the pill.

Del Monte was explained by Vice Chancellor Laster as intended to deal with situations where a financial advisor to a buyout target surreptiously associates with a potential bidder in order to provide financing, while receiving fees from both:

“[A]lthough Barclays’ [the target’s advisor] activities and nondisclosures in early 2010 are troubling, what indisputably crossed the line was the surreptitious and unauthorized pairing of Vestar with K.K.R [potential bidders]. In doing so, Barclays materially reduced the prospect of price competition for Del Monte.”

This case will be of interest mainly to investment bankers and other financial advisors to takeover targets. It tells us that such intermediaries must not ‘two time’ the situation by affiliating with a potential buyer, at least without full disclosure and consent of all concerned, and perhaps not at all. In M&A situations, boards of targets may wish to obtain warranties from their advisors that they will not engage and have not engaged in such practices with respect to their transaction.

The author’s concern is not with the reasoning or outcome in either situation, which seems sound. Rather, it is with the manner in which Delaware jurisprudence has developed, to emphasize such analysis to the exclusion of consideration of the manner in which boards oversee management in situations not involving M&A transactions. One sees constant honing of Delaware law applicable to such situations, even in cases such as these where neither Airgas nor Del Monte have any systematic importance, but much less focus on the need for strong governance in the ‘ordinary course.’ To the author, if the last several years illustrate anything about the need to improve governance, it is that the greatest threat to the economy comes not from these “major corporate transactions,” but from flawed conduct of “everyday” business.

Subjecting actors in these relatively minor M&A situations to this sort of intensive scrutiny, while subjecting the Citigroup board to less scrutiny despite the significance of Citigroup to the economic meltdown send the wrong message to all concerned.

Continue Reading ·

New Resources: Sustainability Quotes, Crisis Timeline, Cal Corp Law & Proxy Access Avoidance

Quotes – The Business Case for Sustainability & CSR Reporting: Selected Quotes from the Business Community July 2010. Tim Smith of Walden Asset Management, offered up  a helpful resource providing a selected set of quotes from CEO’s and company CSR reports on the business case for Sustainability and CSR reporting highlighting how they contribute to shareowner value.   Business leaders explain in their own words why their companies are stepping up on Sustainability issues and how they contribute to the business and its bottom line. The research was done by Carly Greenberg, a Summer Associate at Walden and a student at Brandeis University. You can download it from the Socially Responsible Business/Investments section of our Links page.

Sullivan & Worcester recently announced a free resource for law and corporate librarians, researchers and reporters. The Financial Crisis Timeline is a full chronological directory of the Federal Government’s actions relating to the financial crisis since March 2008. Links take the user to government press releases or government web pages.  You can also find on our Links page in the History section, for future reference. (Hat tip to Dan Boxer, University of Maine School of Law)

Keith Bishop, a partner in Allen Matkins, recently started a blog devoted to California corporate and securities law issues. For future reference, you can find it on our Links page in the Law section. As I recall, Bishop first came to my attention after 1991, when the Rules Committee of the California Senate appointed him the Senate Commission on Corporate Governance Shareholder Rights and Securities Transactions.

For companies seeking to aviod proxy access, J.W Verret (Truth on the Market) posted the second of two strategies. Proxy Access Defense #1 involved adopting poison pills.

In Selectica, summarized by Pileggi here, the Court held valid a poison pill with a 4.99% trigger.  At first glance this seems to be a great twist for those of us who remain skeptical of the federal government’s intrusion into this foundational issue of state law.  Boards could just lower the pill trigger to 4.99%.  Then even to the extent shareholders could afford to obtain a 5% interest in a company, those who did not already own a 5% interest at the time of the pill’s adoption would not be able to obtain an interest sufficient to nominate onto the corporate proxy.

Even after enactment of Dodd-Frank, Verret speculates this tactic might work at most companies, since the threshold being considered by the SEC for small companies is 5%. The latest strategy offered up by Verret in Proxy Access Defense #2 is even more insidious:

The Delaware General Corporation Law gives the board and the shareholders the co-extensive authority to adopt bylaws setting the qualification requirements necessary to become a director.  There is very little case law interpreting this provision, other than the general rule from Schnell v. Chris-Craft that powers granted to the corporation may not be used in an inequitable manner.  Qualification requirements based on experience, education, and other background-like variables would likely survive scrutiny, particularly where they are adopted well in advance of a threatened proxy fight.

The key element in such a bylaw would be that the Board would serve as the ultimate interpreter of the provisions.  For example, a qualification provision could require directors to have 20 years of experience at a comparable company in the same line of business.  The Board, then, would determine whether that requirement has been met, and only after the proxy contest has actually happened.  Under the holding in Bebchuk v. CA, a shareholder challenge to such a facially neutral bylaw would likely not even be justiciable until a shareholder nominee actually won the contest.  And yet, the prospect that the Board will invalidate the director may discourage nominees in the first instance.

I wonder if Professor Verret also offers advice on how to circumvent tax codes, the Occupational Safety and Health Act, or the Americans With Disabilities Act. Harvard must be pleased to have such a distinguished scholar. Hopefully, most companies will seek to work with their shareowners but I suppose there will always be companies like Apache that may find Verret’s strategies appealing. No, I’m not adding these posts to our Links page. Hopefully, they will fall under the category of fantasy.

Continue Reading ·

Powered by WordPress. Designed by WooThemes