Professor Bainbridge...on law, politics, religion, culture & food

CA v AFSCME: Anti-Shareholder

The usual suspects will be telling us that the Delaware supreme court’s decision in CA v. AFSCME reflects an anti-shareholder on Delaware’s part. Larry Ribstein explains why that view is wrong:

I want to focus on the sensible procedure this case involves, and its federalism implications. As I said more than a year ago,

the SEC should not opine on the merits of proposals, including whether they are permitted under state law: that should be determined by the state courts and legislatures. So the SEC should get out of the business of determining whether a proposal concerns ordinary business, or significant social policy, or even whether it is consistent with state law.

This certification process let the Delaware court decide a sticky question of shareholder bylaw power that a half-century of SEC proxy access decisions had left to federal bureaucrats. The Delaware court’s affirmative answer to the first question is not a particularly surprising result either under the statute or politically. After all, the SEC still has the final say on whether to seek certification, and the Delaware court has given it some incentive to do so in the future.

But does the yes answer to the second question suggest that Delaware will use its power to negate shareholder rights?  I don’t think so.  The court made it clear that it was not deciding the issue as a matter of policy, and left insurgents alternative procedures.  Thus, the court was careful to present itself as a pragmatic forum that would hear the shareholders out on a case by case basis.

So just remember: Be suspicious of the usual suspects.