No not that one.

I speak of the proposed redomestication of Natural Gas Corporation from Colorado to Texas. As Bloomberg reported, ISS recommended in favor of the move, even though it had recommended against Exxon’s move, which prompted accusations of opacity.

(Exxon, ludicrously, argued that Glass Lewis and ISS objected to its move because of their litigation over Texas’s proxy advisor law, conveniently ignoring that well before Texas moved to insulate corporate managers and instigated its war on proxy advisors, Glass Lewis objected to Tesla’s move, and ISS only tentatively recommended in favor, specifically on the understanding that Texas’s legal protections for shareholders were, at that time, comparable to Delaware’s. Also, I note, under Texas law – currently on hold on First Amendment grounds – merely for recommending a vote against management based on governance considerations, Glass Lewis and ISS would have had to announce publicly that they do not provide advice solely in the financial interests of shareholders and notify Ken Paxton of their recommendation.)

Anyhoo, ISS’s change of heart for Natural Gas is interesting and worth unpacking. Natural Gas Corporation currently has a staggered board, which can only be destaggered by an overwhelming vote of 80% of outstanding shares – an extremely high threshold that is difficult to meet in a public company. Directors can only be removed for cause, again with an 80% vote, and this provision, too, can only be eliminated with an 80% vote. But, when corporate law closes a door, some way it opens a window, and in this case, that window is, nothing in the charter or bylaws of Natural Gas Corporation require a supermajority to convert into a different entity: a conversion can occur by a simple majority vote. Of course, a conversion requires new organizational documents, which are treated as part of the plan of conversion. So, Natural Gas Corp proposes to convert to a Texas entity, and the new Texas organizational documents will remove the stagger, remove the supermajority vote requirements, and permit shareholders to remove directors with or without cause by a simple majority vote.

Natural Gas’s board is not proposing to adopt Texas’s opt-in limits on derivative litigation (i.e., to require the plaintiff to hold 3% of shares), or Texas’s limits on shareholder proposals (3% or $1 million holding requirement), but it isn’t – as ArcBest did – promising to never unilaterally adopt these provisions in the future. And, of course, Natural Gas’s board will automatically reap the benefit of Texas’s high threshold for insider liability, namely, a showing of “fraud, intentional misconduct, an ultra vires act or a knowing violation of law.”

Given the givens, ISS concluded that benefits to shareholders of the improved governance structure were worth the loss of other rights, which seems an entirely reasonable conclusion.

That said, it is worth noting that Natural Gas could have achieved the same benefits to shareholders by reincorporating to Delaware, and it certainly could have committed in its charter to never adopt Texas’s optional holding requirements for proposals and litigation. By choosing Texas, the board is offering shareholders a cynical trade: we’ll enhance your voting power in exchange for greater insulation from liability.

And another thing. New Shareholder Primacy podcast is up!  Me and Mike Levin talk about, naturally, the SpaceX S-1. Here at Spotify; here at Apple; and here at YouTube.

And still another thing. In connection with the release of his book, Corporate Power and the Politics of Change, Rutgers law professor Matteo Gatti is hosting a series of podcasts with corporate law professors exploring the book’s themes. Matteo was kind enough to invite me to participate; there are also – or will be soon – episodes with Stephen Bainbridge, Jill Fisch, Swarnodeep Homroy, Elisabeth Kempf, Katharina Pistor, Mark Roe, Veronica Root Martinez, Roy Shapira, Tim Smith, and Reilly Steel.