Title

Pandora's Ballot Box, or a Proxy with Moxie? The Majority Voting Amendment to Delaware Corporate Law

Authors

John Verret

Abstract

The Delaware General Assembly has recently adopted an amendment to the Delaware General Corporation Law which provides that where shareholders have adopted a majority voting bylaw for corporate elections over the traditional plurality scheme, a corporation may not subsequently amend its bylaws to return to plurality voting without shareholder approval. I will compare this provision to other approaches and try to explain the reasons underlying its adoption. I will also briefly summarize the evolving shareholder empowerment debate and analyze the majority voting provision in the context of that discussion. I will describe some unique and unanticipated interactions between majority voting bylaws and various other working parts of corporation and securities law affecting the shareholder franchise, a carefully protected right in Delaware jurisprudence. The most prevalent corporate strategies responding to this movement will be explored and the difficulties of implementing majority voting will be described. Finally, I will analyze voting schemes from the political sphere in an attempt to find analogous lessons for the corporate arena. I will then end with some predictions about future developments which will hinge on the outcome of SEC rules proposals, further DGCL revisions, and the responses of Delaware incorporated entities. This piece blends three distinct groups of thought: i) Theoretical corporate law scholarship and financial regulatory theory, ii) Interpretation of Delaware Chancery Court cases, and iii) Practical analysis on the future of the majority voting movement and the strategic choices facing board of directors in the aftermath of the Delaware amendments and corollary SEC and NYSE regulatory initiatives.

Disciplines

Business Organizations Law

Date of this Version

February 2007