Last week, VC Will dismissed the plaintiffs’ claims in The Gregory M. Raiff 2000 Trust v. Jenzabar, Inc., et al.. The complaint alleged a number of fiduciary breaches, including unearned stock giveaways to insiders over a period of 11 years that increased their ownership from 18% to 91%. Critically, the plaintiffs argued that the dilution of their voting power via the stock issuances was a direct claim, rather than a derivative one. VC Will disagreed:

These are quintessential derivative claims. In Brookfield Asset Management, Inc. v. Rosson, the Delaware Supreme Court confirmed that “equity overpayment/dilution claims, absent more, are exclusively derivative.” The harm alleged here—the improper extraction of corporate assets and equity—was suffered in the first instance by Jenzabar.  Any resulting dilution of the minority
stockholders’ voting power or economic interest is a secondary harm shared proportionally among all stockholders.  The recovery for such claims flows to the corporation.

The plaintiffs attempt to evade Brookfield by shoehorning their allegations into two recognized exceptions. Both arguments are unavailing.

First, the plaintiffs argue that the dilution claims are direct because the cumulative transactions “resulted in a . . . change in control” under Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc. Brookfield acknowledged that a dilution based claim might be direct if it involves a transaction that shifts control from a diversified group of stockholders to a controlling interest, depriving the minority of a control premium.  But a creeping accumulation of stock over a decade is not a Revlon transaction.  There was no active bidding process, merger, or sale where Jenzabar’s stockholders were wrongfully deprived of a control premium.

There are two separate ideas here that are worth teasing out. The first is VC Will’s implicit suggestion that direct claims for dilution of control can only be brought in the context of some kind of active bidding process, merger, or sale. On that point, I actually interpret Brookfield differently; in my paper, The Three Faces of Control, I argued that Brookfield implied that specific reallocation of control rights away from some stockholders to others could give rise to a direct claim, focusing on this particular Brookfield quote:

To the extent the corporation’s issuance of equity does not result in a shift in control from a diversified group of public equity holders to a controlling interest (a circumstance where our law, e.g., Revlon, already provides for a direct claim), holding Plaintiffs’ claims to be exclusively derivative . . . is logical and re-establishes a consistent rule that equity overpayment/dilution claims, absent more, are exclusively derivative.

And, as I discussed in the paper, prior to Brookfield, there were a limited number of Chancery decisions that also held that when a board permits an insider to gain enough shares to achieve hard control, resulting fiduciary claims may be brought directly. For example, in Louisiana Municipal
Police Employees’ Retirement System v. Fertitta, 2009 WL 2263406 (Del. Ch. July 28, 2009), plaintiffs were able to bring direct claims that a board improperly failed to deploy a poison pill, which allowed the company’s chair and 46% stockholder to increase his stockholdings above 50% via open market purchases.

Notably, as I previously blogged, a couple of years ago, Chancellor McCormick seemed to agree with my interpretation of Brookfield in Cascia v. Farmer. There, Hertz engaged in a share buyback that increased a blockholder’s stake from 39% to 56%. Chancellor McCormick held that fiduciary claims could be brought both directly and derivatively.

But there was a second aspect to VC Will’s ruling, and that’s the idea that there’s a difference between handing control to someone in a relatively small and temporally-confined series of transactions, and distributing it slowly over a period of many years. That‘s actually a bit more complex to tease out, and at bare minimum, it might suggest that the direct claims in Jenzabar ripened at the moment the insiders’ holdings crossed the 50% threshold.

Anyhoo, this is an important issue that I hope the Delaware Supreme Court will provide some guidance on; as I pointed out in my previous blog post, there is a real chance at some point a board is going to sign a stockholder agreement with someone that gets challenged in a direct action, and Delaware will have to lay down ground rules about whether/when that is permissible.

And another thing. New Shareholder Primacy podcast is up!  Me and Mike Levin talk about VC David’s decision dismissing what were the last of the real Delaware claims against Tesla, and what it really would mean if a corporate board were to think like an activist.  Here at Apple; here at Spotify; and here at YouTube.

Advisers, investors, and corporate leaders now consider the differences between different jurisdictions. To provide these audiences with a more complete picture of Nevada law, we prepared a Response to Professor Barzuza’s recently revised and recirculated work, “Nevada v. Delaware” (the “Draft”).

I am enormously grateful to Nevada Governor Joe Lombardo, Nevada Secretary of State Francisco V. Aguilar, and Nevada Assemblyman Joe Dalia for also joining this Response alongside another twenty Nevada lawyers and faculty members at the William S. Boyd School of Law. The persons joining do not speak for their firms or employers or necessarily agree that every case cited or settlement reached came out the right way. I also note that I alone have prepared this blog post and it is not “joined” by the persons that joined the Response. But we all agree that Professor Barzuza’s Draft does not accurately present Nevada corporate law. We rise in defense of Nevada because the piece has been broadly circulated over a period of years and promoted on the Harvard Law School Corporate Governance Forum, the Columbia Blue Sky Blog, and on social media. We hope that this Response will also see substantial circulation to inform the same audiences about our concerns.

Given the widespread dissemination of the work and the misimpression it creates about Nevada, we prepared and made this Response public so that advisers, investors, and corporate leaders will have access to a more complete picture. I provided Professor Barzuza with an advance copy of this Response on Monday and we corresponded afterward. I will not speak for her here, and her work speaks for itself.

Our Response highlights a number of concerns. I briefly detail just a few of them here. I encourage you to read the Response as this brief summation does not cover all of our concerns. We hope that our Response will help to educate investors and advisors who might otherwise rely solely on Professor Barzuza’s Draft for information about Nevada law.

Significant Omissions

The Draft omits significant, relevant material. For example, the Draft only cites to four decisions from Nevada’s courts. One of those citations attributes language to the Nevada Supreme Court that I cannot find anywhere in the opinion. It omits relevant Nevada Supreme Court decisions that sit in tension with core claims that Nevada is a liability free jurisdiction.

The Draft also omits information about substantial settlements that have occurred, including recent multimillion dollar settlements, other settlements for hundreds of thousands in fees, a plaintiff-side victory in a jury trial, and a pending settlement for approximately $17 million. These are not all of the settlements that have occurred under Nevada law, but many are easily discoverable via the SEC’s EDGAR portal and documented in the Response.

False or Mistaken Quotations

In reading Professor Barzuza’s Draft, I did not recognize her depiction of Nevada. When I attempted to understand the basis for her views, I could not find a significant amount of quoted material in the sources identified. Although I have not attempted to identify every false or mistaken quotation from the disseminated draft, the Response details a number of instances where quoted material does not appear in the sources cited.

Mischaracterization of Nevada Legislative History

Nevada’s statutory business judgment rule applies as a default, in contrast to Delaware’s opt-in structure for its liability limits in Section 102(b)(7). In discussing Nevada’s legislative history Professor Barzuza contends that Nevada’s shift to an opt-out structure “was not justified by policy considerations” and that “no one explained why Nevada should deprive shareholders of the opt-in authority they retain in every other state.”

But the same legislative minutes cited by Professor Barzuza show the opposite. The testimony provided that “the proposal actually benefits the small ‘mom‑and‑pop’ operation” and that the testifying lawyer had “probably seen thousands of corporations since 1987, and [that] he can think of only one instance in which a corporation charter did not have that provision because it was, essentially, a small business that apparently did not have the funds to seek legal counsel.” The testimony went on to explain that the corporation had used “some office supply form, and missed the director and officer protection.” Notably, Professor Couture had specifically identified this policy rationale in a paper published before Professor Barzuza re-released the Draft.

Ultimate Issue

Nevada and Delaware do differ on certain issues, and these differences do not mean that either state’s approach is right or wrong. 

Delaware’s law creates tradeoffs and imposes costs on companies operating under Delaware law by subjecting them to a greater degree of oversight through litigation.  Some view this litigation as offering benefits and preventing misconduct. The Draft expresses concern that Nevada unduly limits these litigation rights.  But not all scholars, jurists, or practitioners agree that Delaware’s level of stockholder litigation is optimal or even good. 

It is widely understood that Nevada corporate law offers more certain and durable protection for directors and officers than does Delaware corporate law. As Professor Couture has recognized, Nevada has made different policy choices, and Nevada’s corporate law “prioritizes limiting the negative impacts of monetary liability, such as disincentivizing qualified officers from serving, over deterring officer breaches of fiduciary duty.”

Nonetheless Nevada is not offering up a liability-free legal regime, and Nevada, as a jurisdiction, remains far from indifferent to misconduct.  Nevada law plainly prohibits directors from engaging in “intentional misconduct, fraud, or a knowing violation of law.” If Nevada errs, it errs on the side of preventing low-value litigation, creating clear rules to guide transaction planners, and allowing boards of directors efficiently to operate corporate entities.

That some litigation might be possible in Delaware while dead on arrival in Nevada does not mean that Nevada’s approach is wrong—it is just different from Delaware law, and time will tell which is better for which types of corporations. 

As investors, advisers, and corporate leaders continue to consider differences between jurisdictions, I hope that this Response will help provide information to combat widespread misperceptions and allow decisions to be made on the merits instead of on misinformation.

Each summer, the Business Scholarship Podcast features scholars entering the upcoming law-teaching market. Episodes are recorded from May through July, with the goal of publication before the FAR distribution (this year, August 13). We welcome guests entering the market who work in business law, broadly defined, including corporate and securities, tax, antitrust, bankruptcy, commercial law, contracts, and related areas. Anyone interested in being featured is invited to contact Andrew Jennings at andrew.jennings@emory.edu.

Separately, I remain deeply grateful to senior colleagues who gave comments on early work and helped me develop. If there is new work that’s relevant to this blog’s readers, please feel free to send it to me or our other fantastic editors.

As many readers know, I am a proponent of teaching leadership in the law school setting–in curricular, co-curricular, and extracurricular activities. (For me, as a long-term licensed practitioner, it is hard to teach business law without teaching leadership.) I had the privilege of serving as the chair of the Association of American Law Schools Section on Leadership last year. The section produces regular programming throughout the year on lawyer leadership from a variety of perspectives.

I was asked by this year’s section chair, Tania Luma, to organize and moderate a program for the section this spring. That program is next week–specifically, Wednesday, April 29, 4:00 PM – 5:00 PM ET/3:00 PM– 4:15 PM CT/2:00 PM – 3:15 PM MT/1:00 PM – 2:15 PM PT–on Zoom. Registration is required for The program title and description are set forth below.

Revisiting the Teaching of Lawyer Leadership: Empirics, Skills, and Values

Lawyers lead in a variety of capacities in and outside their representation of clients. Law schools have increasing realized both this fact and their obligation—or at least some responsibility—to educate students more directly for these many leadership roles. This webinar features a conversation with two law faculty members who engage with teaching and researching lawyer leadership. Their work as instructors and scholars and the observations that come from that work offer key insights on why teaching lawyer leadership remains so important in an era of rapid legal change, what leadership knowledge and skills lawyers need to survive and thrive, and what law teachers can do to foster that knowledge and those skills.

The presenters are Hillary Sale and Kate Schaffzin, both accomplished lawyer leaders and researchers focusing on, among other things, lawyers as leaders. Come hear about their research and the enlightenment it provides into what and how we teach leadership in and outside the law school classroom.

This week, we have some new developments in the conservative/Trump Admin effort to control and/or undermine shareholder power.

First, we have these new releases from the Department of Labor.

Now, I previously posted about how ERISA regulation could be used to undermine shareholder voting; these new releases come at the problem from a different angle.  They hypothesize that any proxy advisor serving an ERISA-regulated plan is necessarily an ERISA fiduciary – and, as I understand it, that would potentially include proxy advisors who serve mutual funds that are included in a 401(k) menu.  Notably, proxy advisors’ pivots to offering “research only” products won’t save them; the releases explain even providing research might render a proxy advisor an ERISA fiduciary.

The releases also suggest that the funds themselves included in a 401(k) menu – and the investment advisers that serve them, i.e., BlackRock and its stewardship team – are ERISA fiduciaries.  

All of this would dramatically expand the regulatory ambit of ERISA, and though the administration says the implication is that these entities should only act to maximize plan wealth, what they mean is that (1) any measures pertaining to social responsibility will be treated as presumptively unrelated to plan wealth, and (2) all of these entities could be subject to much more onerous disclosure and recordkeeping requirements, in ways that may inhibit their ability to vote freely. 

Now, to be fair, a lot of funds within retirement plans are already ERISA fiduciaries: as Natalya Shnitser points out, collective investment trusts (CITs) included in defined contribution plans are considered ERISA fiduciaries, even if mutual funds are not, and BlackRock et al. seem to be managing just fine sponsoring CITs that are included in ERISA plans.  Still, though, I view this as kind of a first step toward imposing a more onerous regulatory scheme – after Trump I struck out with its first attempt– and unless mutual fund sponsors are willing to split votes between those that represent proportional shares of funds included in ERISA plans and proportional non-ERISA shares, fund managers are likely to simply vote as regulators prefer for all mutual fund assets. 

Notice the further implications here: in some ways, this is about Trump admin bugaboos like diversity and climate change, but in others, the Trump Admin and state regulators are pretty explicit about stamping out all challenges to management (see below on Indiana’s law). And if regulators have the freedom to decide (on a theory of what counts as wealth maximization) which boards can be challenged by shareholders and which cannot, that leaves corporate management awfully … dependent … on the state to maintain their positions, with all the implications that follow.

I’ll also note – again, see comment on Indiana’s law, below – the releases argue that there is no ERISA preemption for state regulation that focuses on wealth maximization.  That matters because Glass Lewis is currently arguing that Texas’s law, purporting to regulate ESG advice or really any recommendations to vote against management, is preempted by ERISA. 

Second, Mike Levin and I did a podcast about pending proposals at the state level to regulate proxy advisors, mostly involving this model act by the conservative anti-ESG organization “consumers defense.”

Well, Indiana has gone ahead and adopted one of these proposals, and ISS filed a lawsuit to challenge it. The key features of these laws, as Mike and I talked about, are: (1) they try to avoid the First Amendment problems that plagued earlier laws (like Texas’s) by regulating any advice against management rather than ESG advice specifically, and (2) in at least some cases, including Indiana’s, they purport to regulate any proxy advice given to any client about any company regardless of where either the client or the company is located.  So, predictably, ISS is challenging Indiana’s law on First Amendment grounds – regulation of speech against management is still regulation of speech – and dormant Commerce Clause grounds. 

Third, I previously posted about how the SEC was limiting proxy exempt solicitations, thereby cutting off an important avenue of shareholder communication.  Mike and I also talked about that on a podcast.

Well, the Interfaith Center on Corporate Responsibility is fighting back, as well as it can, by offering to privately host the communications that the SEC has now banned.  I don’t know if this can really replace EDGAR – where institutional investors subscribe for updates – but it’s something, anyway.

And another thing. New Shareholder Primacy podcast is up!  Me and Mike Levin talk about how proxy voting works, using Starbucks as an example.  Here at Apple; here at Spotify; and here at YouTube.

Corporate & Securities Litigation Workshop

Call for Papers

The University of Illinois College of Law, in partnership with the University of Richmond School of Law, UCLA School of Law, and Vanderbilt Law School, invites submissions for the Thirteenth Annual Corporate & Securities Litigation Workshop. This workshop will be held on Thursday, October 22 and the morning of Friday, October 23, 2026 in Chicago, Illinois.

Overview
This annual workshop brings together scholars focused on corporate and securities litigation to present their scholarly works. Papers addressing any aspect of corporate and securities litigation or enforcement are eligible, including securities class actions, fiduciary duty litigation, and SEC enforcement actions. We welcome scholars working in a variety of methodologies, as well as both completed papers and works-in-progress. Authors whose papers are selected will be invited to present their work at a workshop hosted by the University of Illinois College of Law. Participants will pay for their own travel, lodging, and other expenses.

Submissions
If you are interested in participating, please send the paper you would like to present, or an abstract of the paper, to corpandsecworkshop@gmail.com by Friday, June 12, 2026. Please include your name, current position, and contact information in the e-mail accompanying the submission. Authors of accepted papers will be notified in July.

Questions
Any questions concerning the workshop should be directed to the organizers: Verity Winship (vwinship@illinois.edu), Jessica Erickson (jerickso@richmond.edu), Jim Park (james.park@law.ucla.edu), and Amanda Rose (amanda.rose@vanderbilt.edu).

With proxy season getting underway, I’m sharing the updated list since my post about this in March. We have another 6 companies added to the list since March 23, a rate of about two companies a week. Five announced departure plans were from Delaware and one from Ireland. In terms of destinations, four companies announced for Texas with two announcing for Nevada.

Company NameStock TickerOrigination StateDestination State
1. TruGolfTRUGDelawareNevada
2. Forian, Inc.FORADelawareMaryland
3. LQR HouseYHCNevadaDelaware
4. CBAK EnergyCBATNevadaCayman Islands
5. Cheetah NetCTNTNorth CarolinaDelaware
6. GalectoGLTODelawareCayman Islands
7. Resolute Holdings Management, Inc.RHLDDelawareNevada
8. Forward Industries, INCFWDINew YorkTexas
9. EQV Ventures AcquisitionFTWCayman IslandsDelaware
10. Datadog, Inc.DDOGDelawareNevada
11. Haymaker Acquisition Corp 4HYACCayman IslandsDelaware
12. CDT EquityCDTDelawareCayman Islands
13. eXp World HoldingsEXPIDelawareTexas
14. ArcBest CorpARCBDelawareTexas
15. Texas Capital BancsharesTCBIDelawareTexas
16. ExxonMobil Corp.XOMNew JerseyTexas
17. NL IndustriesNLNew JerseyDelaware
18. ClearOne IncCLRODelawareNevada
19. Liberty Media CorporationFWONA, FWONB, FWONKDelawareNevada
20. The LGL Group, Inc.LGLDelawareNevada
21. TTEC Holdings, Inc.TTECDelawareTexas
22. Weatherford International plcWFRDIrelandTexas
23. Dream Finder HomesDFMDelawareTexas
24 Voyager TechnologiesVOYGDelawareTexas
25. GPGI, Inc.GPGIDelawareNevada

From a trend perspective, I’m feeling comfortable now that my prediction that this year would see more action than last year will be accurate. Looking back on 2025, my imprecise count had roughly 28 announcements for Nevada and eight for Texas. So far, Texas has nine and Nevada has seven, so Texas has already exceeded its 2025 count. Here is a link to a PDF of the underlying dataset.

Research Assistant Infographics

We have some more infographics from the research assistant team here.

Origin & Destination

Market Cap By Destination

Vote Results

Claude’s Infographics

I gave the same information to Claude and asked it to also produce some data visualizations. I also instructed it to keep Nevada silver, Texas red, and Delaware blue for a degree of visual consistency. Here are some others that may help make sense of what we’re seeing.

Migration Routes

What interests me about this visualization is that it shows Texas is drawing from non-Delaware jurisdictions with companies shifting from Ireland, New Jersey, and New York. Nevada’s pickups so far this cycle are all coming from Delaware. Delaware’s pickups come from Nevada, North Carolina, and the Caymans.

Market Cap by Destination Excluding Exxon

Exxon is just so large that the picture changes if you set it to the side.

Notes on Proxies

Proxy Notes

Looking through the new filings, a few things jumped out at me as significant.

TTEC

TTEC indicated that it had been mulling this decision for a long time and that it had been concerned with Delaware’s “apparent hostility to controlled companies at the time:”

The TTEC Board and management have been considering the business merits of possible redomestication since 2016, as part of the Company’s broader consideration of how it can best support its strategic goals, serve its global clients, and position itself for future success. More recently, the Board’s evaluation of a potential redomestication included deliberation and discussion of the advantages and disadvantages of changing the jurisdiction of incorporation at meetings of the Board in December 2023 and February 2024. The Board, both before and after those meetings, explored the business merits of redomestication while also considering the evolving realities of Delaware law and its apparent hostility to controlled companies at the time. The Board at that stage concluded that, while redomestication was in the best interests of TTEC and its stockholders from a business perspective, the uncertainties in Delaware law, the courts apparent hostility to controlled companies’ efforts to redomesticate out of Delaware at the time, and other factors weighed in favor of delaying any action. The Board directed management to continue monitoring developments in Delaware corporate law and to keep the Board advised on relevant issues and developments.

TTEC also recited a list of other companies that had announced moves or otherwise headquartered in Texas, something I hadn’t seen any other proxy do. This is the paragraph:

The Company is not the first public company to consider redomiciling from Delaware to another jurisdiction. Other public companies that have redomiciled during the last two years or that have pending redomestication proposals include ArcBest Corporation, Coinbase Global, Inc., Dillard’s, Inc., Dropbox, Inc., Eightco Holdings Inc., EquipmentShare.com Inc, eXp World Holdings, Inc., Simon Property Group, Inc., Tesla, Inc., Texas Capital Bancshares, Inc., The Trade Desk, Inc., and Tripadvisor, Inc. In addition, Exxon Mobil Corporation recently proposed redomiciling from New Jersey to Texas. Other prominent companies incorporated in Texas include AMERISAFE, Inc., Atmos Energy Corporation, Camden Property Trust, CenterPoint Energy, Inc., Rush Enterprises, Inc., Service Corporation International, Southwest Airlines Co., and Space Exploration Technology Corporation (SpaceX).

Dream Finders Homes

Dream Finders Homes discussed differences between business courts and preferred Texas:

While Delaware has historically been known for its developed body of case law, the Board of Directors views Texas’ increasingly code-based approach and adoption of a dedicated Business Court as better supporting the Company’s strategic planning in today’s competitive environment. Texas’ legal framework is intended to reduce reliance on judicial discretion and offers potentially more predictable statutory standards. While Nevada also has a strong corporate code, the Board of Directors considered the development of the Texas Business Court and Nevada’s business docket and believed that the Texas Business Court would provide for greater stability in decision-making and a more streamlined process for litigation.

GPGI

GPGI echoed views we’ve already seen from other companies:

The Board believes that there are several reasons the Nevada Reincorporation is in the best interests of the Company and its stockholders. The Board determined that it would be advantageous for the Company to be able to operate with agility in a predictable, statute-focused legal environment, which will better allow the Company to respond to emerging business trends and conditions as needed. The Board considered Nevada’s statute-focused approach to corporate law and other merits of Nevada law, including that, among other things, the Nevada statutes codify the fiduciary duties of directors and officers, which has the potential to decrease reliance on judicial interpretation and promote stability and certainty for corporate decision-making. The Board also considered the increasingly active litigation environment in Delaware, which has engendered costly and often meritless litigation and has the potential to cause unnecessary distraction to the Company’s directors and management team.

On our podcast, Mike Levin and I previously discussed Exxon’s new retail shareholder voting program.  In sum, Exxon got SEC permission to allow its retail shareholders to adopt standing voting instructions to automatically cast their proxy votes in accordance with Exxon’s management.

I’ve heard a lot of shareholder-rights advocates speak favorably of the program, but I disagree.  I’m all for making it easier for retail shareholders to vote – including allowing them to adopt standing voting instructions (Jill Fisch had a whole thing on this) – but Exxon’s program only allows retail to vote for Exxon’s board.  Exxon is almost certainly expecting that, just as retail tend not to vote much at all, those who opt in to the program will likely never bother to revisit their instructions, leaving Exxon with a banked set of votes to oppose any activist interventions (including, of course, what I call “little a” activism, i.e., shareholder proposals).  The way the program is currently constructed, it’s a board entrenchment device.

Which is why I was happy to see that the New York City Comptroller’s Office, on behalf of the New York City Police Pension Fund, has submitted a shareholder proposal for Exxon to open up the program to include options to vote against management. 

There are plenty of ways this could go – standing instructions in favor of climate proposals, or to vote as recommended by independent entities, like themed proxy advisor recommendations, things like that.  Exxon, shockingly, recommends shareholders vote against the proposal, because:

The proposal asks ExxonMobil to implement additional voting options beyond those approved in our SEC no-action letter and which we believe violate proxy rules. For example, the proposal specifically suggests an “against management” option that would be inconsistent with state law and the Board’s fiduciary duties, making the proposal unworkable and illegal. By issuing a no-action letter, the SEC acknowledged ExxonMobil’s Voluntary Retail Voting Program respects the rights of shareholders to make their own decisions. It was also clear that our program, unlike passthrough voting by investors, represents a direct solicitation by ExxonMobil. The proposal ignores all this and wants ExxonMobil to make solicitations directly against the Board’s recommendations…..

The proposal ignores the fact that retail shareholders enthusiastically embraced this program, as evidenced by their participation. (NB: an overwhelming 3% of all shares – which I gather to be about 11% of the retail base – have opted in. I have no insight into the level of enthusiasm these shareholders expressed when doing so) The guidance provided in the SEC no-action letter is applicable to all parties, and the New York City Comptroller’s Office, or any other party, is free to implement its own retail voting program….

(Ad hominem attacks on the New York City Comptroller’s Office omitted).

So, I’m gonna take the last part first. What exactly does it mean, the Comptroller’s Office can implement a retail voting program?  For … shareholders of the Comptroller’s Office?  Shareholders of companies in whose stock the Comptroller’s Office holds shares?  What exactly does Exxon have in mind here?

As for illegality, I think the point Exxon is making is that, since the Board necessarily recommends that shareholders vote for things the Board thinks are good, if the Board recommends shareholders vote against those things, the Board is violating its fiduciary duties.  Fine.  But Exxon also says that its program merely effectuates retail preferences – which suggests it has nothing to do with what the Board recommends at all; it’s only about enabling retail to express what they would prefer.  So fiduciary obligations should have nothing to do with anything.

The way that Exxon gets to the idea that it’s making “recommendations” – which contradicts its own claim that the program merely effectuates retail preferences – is by defining its program as including a “proxy solicitation.”  But proxy solicitations don’t have to include recommendations – they include any request that a shareholder allow Exxon’s representative to vote shares (in any manner) on his or her behalf:

(1) The terms “solicit” and “solicitation” include:

(i) Any request for a proxy whether or not accompanied by or included in a form of proxy:

(ii) Any request to execute or not to execute, or to revoke, a proxy; or

(iii) The furnishing of a form of proxy or other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy,

In other words, just by giving shareholders a proxy card, and asking them to vote – in any way – Exxon is engaged in proxy solicitation.  And simply giving shareholders options as to how to vote is not a recommendation, and – to a more limited extent – is currently required right now, when Exxon sends shareholders a proxy card that includes “no” options.  So it’s hard to see where the fiduciary violation comes in merely by giving retail shareholders a greater ability to express their own preferences; indeed, if Exxon were judged by Delaware standards (it’s a New Jersey company, for now), it might be a violation of fiduciary duty to impede shareholders’ ability to vote against management.

That said, currently, the Comptroller’s Office is asking Exxon’s shareholders to vote to expand voting options for retail, and the Exxon shareholder base is about 66% institutional, including around 10% at Vanguard, 7% at BlackRock, etc.  And I don’t know that institutional holders, in general, have an overriding interest in seeing retail voices enhanced.  Not to mention, of course, the current political environment, where the SEC has suggested that institutional index funds might actually mislead their own investors about their investment strategy if they dare to vote against management.

Point being it’s hard to be sure that any institutional actors – mutual funds, proxy advisors, anyone – are effectuating their actual preferences (whatever that means) when the threat of federal retaliation hangs over them.

Anyhoo, I guess this is what Chair Atkins has in mind when he says the SEC is “focused on ensuring that States, and not the SEC, regulate matters of corporate governance.”

And another thing. New Shareholder Primacy podcast is up!  Me and Mike Levin talk about the “zero slate” proxy solicitation at BJ’s Wholesale Club (I learned that phrase from The Corporate Counsel), and the activist intervention at Snap.  Here at Apple; here at Spotify; and here at YouTube.

Visiting Faculty in Health Law 

Loyola University New Orleans College of Law is now accepting applications for a visiting faculty appointment for the 2026-27 academic year in the area of Health Law. The visitor’s course load will be two courses per semester. Qualifications for this position include a J.D. degree and experience teaching Health Law courses, including Health Law I and Health Law II. Demonstrated expertise in working with a diverse student body is preferred. If you are interested in applying, please submit a curriculum vitae and cover letter to Professor Robert Garda, Interim Associate Dean of Faculty Development and Academic Affairs (rgarda@loyno.edu).

All ranks will be considered.

About the College of Law

The College of Law is located in one of the most culturally diverse cities in the United States, with unique cuisine, museums, historical sites, and a flourishing arts and music community. New Orleans is the seat of the United States Fifth Circuit Court of Appeals, United States District Court for the Eastern District of Louisiana, Louisiana Supreme Court, Louisiana Fourth Circuit Court of Appeal, as well as other lower courts. The College of Law has a student population of approximately 500 students, over forty faculty members, active clinics that have spearheaded numerous social justice reform efforts, and summer abroad programs. Its location in Louisiana, one of the world’s best known “mixed jurisdictions,” provides unique opportunities for comparative and international law scholarship. Loyola University is an educational institution dedicated to fostering intellectual achievement, personal development, and social responsibility, and it is committed to the human dignity and worth of every person.

From this Law360 article, I learned that Clearway Energy proposes to simplify a complex capital structure. It has two classes of stock that trade on the NYSE: A and C. The A’s have 1 vote per share; the C’s have 1/100th of a vote per share.

It also has B and D shares, held exclusively by CEG, who as a result controls 55% of the company’s voting power.

Clearview proposes a charter amendment to convert the A shares into C shares and, recognizing that this would cause CEG’s own voting power to increase, proposes to fix that problem by putting a bunch of CEG’s shares into a Voting Trust in a mirror voting arrangement that ensures CEG’s voting power does not rise above 55% as a result of the reclassification.

Here is the proxy explaining the proposed changes. As required under Delaware law, for the amendment to take effect, the Class A shareholders must vote in favor.

Anyway, the Law360 article is about a lawsuit filed by the New England Teamsters Pension Fund challenging the scheme as a conflict transaction, because the scheme will allow CEG to sell down its stake while maintaining its voting power. That’s because shares move in and out of the voting trust, to ensure that CEG always controls 55%.

This is not the first time a controller has altered a corporation’s capital structure to allow sales of the controller’s stock while maintaining the controller’s voting power – but here’s the thing.

NYSE Listed Company Manual 313 states:

Voting rights of existing shareholders of publicly traded common stock registered under Section 12 of the Exchange Act cannot be disparately reduced or restricted through any corporate action or issuance. Examples of such corporate action or issuance include, but are not limited to, the adoption of time phased voting plans, the adoption of capped voting rights plans, the issuance of super voting stock, or the issuance of stock with voting rights less than the per share voting rights of the existing common stock through an exchange offer.

This is a really important provision! The NASDAQ’s version of it is the reason, for example, that Tesla couldn’t just give Musk 25% voting power – which the board said it wanted to do – the only way to confer those votes on him was to give him the associated stock.

So I was tearing my hair, trying to figure out how Clearway Energy could possibly propose to reduce the voting power of the A shareholders, specifically.

And then I found this 2010 NYSE interpretation of its rules, which was apparently the template for Clearway’s proposal:

A Company has a grandfathered triple-class voting structure with Class A, Class B and Common Shares outstanding. The Common Shares and Class B Shares are both listed on the Exchange and have one and 0.1 votes per share, respectively. The Class A Shares have three votes per share and are all held by the controlling shareholder (“Controlling Shareholder”). The Controlling Shareholder also owns Common Shares and controls 76% of the voting power of the outstanding capital stock. None of the classes are by their terms convertible into any of the other classes. There are significantly more Class B Shares outstanding than Common Shares. Consequently, the trading market for the Class B Shares is significantly more liquid and they trade at a higher price than the Common Shares. Holders of the Common Shares have expressed an interest in exchanging their Common Shares for the more liquid Class B Shares. The Company proposes to make an exchange offer (the “Exchange Offer”) in which all
Common Shares would be exchangeable for Class B shares at the option of their holders on a
one-for-one basis.

The Controlling Shareholder has agreed that the percentage of the total voting power of the
Company’s capital stock that he controls following the completion of the Exchange Offer will be
limited to the percentage he controlled immediately prior to its completion. This limitation will be accomplished by a combination of (i) participation in the Exchange Offer by the Controlling
Shareholder (i.e., reducing his voting power by exchanging Common Shares into Class B
Shares) and (ii) an exchange of Class A Common Shares by the Controlling Shareholder for
either Common Shares or Class B Shares with a corresponding reduction in voting power. The
Company understands that consummation of the Exchange Offer may lead to the Common
Shares falling below the Exchange’s continued listing standards for distribution and shares
outstanding and lead to that class being delisted.

313.00 Issue: Would the Exchange Offer of the lower-vote Class B Shares for Common Shares
cause a disparate reduction in voting prohibited by Para. 313?

Determination: The Exchange Offer is permissible under Para. 313….

The Exchange Offer provides for the exchange of Common Shares with one vote for Class B Shares that have 0.1 votes per share, and thus would appear inconsistent with the quoted language of Para. 313….However, in the proposal under discussion here, the Controlling Shareholder has committed to limit his voting power to the percentage of the total voting power he held before the Exchange Offer (76%), by exchanging Class A Shares for Common Shares or Class B Shares to the extent necessary to achieve that result. Therefore, the Exchange Offer does not have the intention or effect of disenfranchising the holders of the Common Shares or the Class B Shares by further entrenching the control of the Controlling Shareholder. While participants in the Exchange Offer other than the Controlling Shareholder will reduce their individual voting power, the actual effect of doing so is de minimis, as the Controlling Shareholder retains a significant majority …

I think Clearway may have modeled its proposal on this guidance, right down to the rationale for the conversion:

Historically, the price of our Class A common stock on the NYSE has generally been below the price of our Class C common stock, despite the greater voting powers of our Class A common stock and the otherwise identical rights of the two classes.

But CEG is maintaining its voting power not by selling a proportionate share of its own stock, as the guidance suggests, but by creating a voting trust that will precommit the votes of its existing stake to ensure its real voting power stays at 55%.

Except that means – and once again, this is what the plaintiff is objecting to in Delaware – due to the structure of the Trust, CEG can sell down its equity stake and maintain its voting power. That wasn’t true before the proposed conversion, and it’s not a feature of the NYSE guidance, either.

My concern is that, if Clearway is permitted to do this, then you can imagine future manipulations. Controllers will be incentivized to create new low vote stock (just as Google did), and then later propose the exact same transaction. As a result, the controller gets a new benefit: maintaining control while selling its stake.

Anyhoo, I’ll add the caveat that this is how I read things but I’m not a listing rules maven so if there’s more that I’m missing, like further NYSE guidance, drop an email and I’ll update this post.

Update: Clearway Energy just announced that it’s amending its plan, and in response, the New England Teamsters Pension Fund agreed to dismiss its claims as moot. Frankly, the thick pack of changes is a little too much for me to parse, but I gather the point of the revisions is fix the problem of Clearway maintaining its voting power while selling its stake; at least, that’s why the plaintiff is declaring the claims moot, anyway.

And another thing. New Shareholder Primacy podcast! This week, me and Mike Levin talk about all the recent guidance and proposals coming out of the SEC. Note: We recorded before the Chubb opinion issued. Here at Spotify; here at Apple; and here at Youtube.