Institutional investors today have to think more about differences between jurisdictions to decide whether to vote in favor of proposals to move from one jurisdiction to another. The Council of Institutional Investors has been working to get up to speed on these issues and recently posted a chart and featured it on the Harvard Law School Forum on Corporate Governance. I gave some comments on an early version of the chart and know that they’re working in good faith to help investors understand the differences. I’m also a big fan of their podcast, the Voice of Corporate Governance which often has thoughtful takes and engagement.

The chart notes that although they “exercised due care in preparing this report, it does not guarantee the accuracy of the information.” It also asks readers to report errors or suggest additional features for comparison by emailing them. These charts will always be works in progress, continually updated as jurisdictions change over time.

Now that I’ve seen the final version, I’ve got some notes on it. Some of this draws from notes I sent earlier in the process and some of it is what I think people need to know now after looking at this version. And a few things are just recent updates.

Director and Officer Liability

The chart highlights differences but uses the phrase “provable in court” when describing director and officer liability for the Cayman Islands, Nevada, and Texas, but not for Delaware. Some think Delaware has an excessive liability environment now, but you still have to prove claims in court there too.

Nevada’s statutory business judgment rule has three real components. It creates a default presumption that directors and officers “are presumed to act in good faith, on an informed basis and with a view to the interests of the corporation.” Establishing liability requires rebutting that presumption and showing two more things: “(1) The director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer; and (2) Such breach involved intentional misconduct, fraud or a knowing violation of law.”

Readers should also understand that there is nuance around default provisions in Nevada too. The chart explains that a 102(b)(7) provision can limit liability in Delaware. It does not explain that Nevada also allows corporations to alter the liability default by setting different conditions in their charter. It might also note that Delaware also now allows exculpation for officers.

Nevada and Delaware have different director and officer liability defaults. Both allow corporations to make changes to the default through the articles of incorporation. Most public companies move away form Delaware’s default and adopt a 102(b)(7) provision. Most Nevada firms stay with Nevada’s default, but I have seen a Nevada firm shift away from our default while I can’t recall a public Delaware company that didn’t reject its default.

Duty of Board of Directors

Here, the chart notes that Delaware requires its firms to “[m]aximize long-term shareholder value” and describes Nevada as allowing boards to consider a range of other stakeholder interests. This is correct in that Nevada does have a constituency statute, like a significant number of other states.

Yet what Delaware’s law actually means on this front in terms of obligations that meaningfully restrain a board remains a debate topic. The view that this is Delaware’s settled policy isn’t universally held. As it’s embedded in case law instead of a statute, exactly what it means may be hard to define.

Functionally, the flexibility available to boards of directors in Delaware remains significant–even if the link to maximizing long-term shareholder value seems dubious at best. Consider an old example. Occidental Petroleum famously donated millions to an art museum and settled the case for some naming rights. This was a business decision entrusted to the judgment of the board, but I continue to doubt that drivers with gas vehicles meaningfully discriminate between gas stations with or without Occidental Petroleum gasoline because Occidental Petroleum donated money to an art museum in Los Angeles.

Books and Records and Inspection Rights

The chart is correct that Nevada does not do Delaware-style 220 actions. But as I’ve explained elsewhere, Nevada courts have allowed access to Non-Objecting Beneficial Owner (NOBO) lists in situations similar to Delaware.

It may also be worth noting that a retail stockholder with a small holding percentage wouldn’t be entitled to books and records even if the company fell behind on annual reporting. The default remains that the action needs support “authorized in writing by the holders of at least 15 percent of all its issued and outstanding shares” or by a 15% holder acting alone.

Nonbinding Shareholder Proposals and Annual Meetings

The chart states that “[w]ith written consent of shareholders with a majority of the voting power, a company could opt not to hold annual shareholder meetings.” It cites to NRS 78.310 for this. I don’t think that’s quite right. When I commented on an early version, I took the view that Nevada assumes that corporations will hold annual meetings and suggested looking at NRS 78.330. That provision provides that “unless the articles of incorporation or the bylaws require more than a plurality of the votes cast, directors of every corporation must be elected at the annual meeting of the stockholders by a plurality of the votes cast at the election.”

Nevada’s statute doesn’t affirmatively say that an annual meeting must be held, but it’s clear that if a corporation does not elect directors within 18 months, NRS 78.345 allows stockholders with 15% of voting power to have a court order that an election be held.

It might be theoretically possible under NRS 78.320 for stockholders to elect directors by written consent, but this seems very unlikely for public companies. Listed companies agree to comply with rules, including requirements to hold annual meetings. The possibility that no annual meeting might be held for any significant public companies seems speculative at best.

Court Consideration of Conflicted Directors

Here the phrase “conflicted directors” can be read in different ways. Is it how to identify conflicted directors or is it for transactions with directors with an interest? For interested directors, the statutory provision is NRS 78.140, not NRS 78.240.

But, NRS 78.240 contains how you identify disinterested directors for a transaction. Now, this is a very minor quibble. Delaware’s standards are described as “[n]ew safe harbor provisions,” but Nevada’s provisions which were passed after Delaware’s are not described as new. Nevada’s newer provision followed Delaware’s. Delaware deferred to stock exchange standards on independence criteria, and then Nevada did something similar.

Specialized Courts

The chart describes the current status of the constitutional amendment to authorize a dedicated, appointed business court. Although it cites to an article discussing the creation of the Nevada Supreme Court Commission to Study the Adjudication of Business Law Cases, it doesn’t discuss the Commission or its work.

And there is relevant news here. Although I don’t have anything to link to on this yet, I understand that it was announced at a recent bench bar meeting that the Commission is launching a pilot program that will dedicate certain judges exclusively to handle business court cases in Clark County. Existing cases are expected to be reassigned by the end of June and the pilot program should go into effect at the beginning of the third quarter this year.

Nevada Statute Up To Date!

The chart also notes that Nevada’s statute hasn’t been updated online–but that’s also changed in the last month. It’s now up to date! You can see when Nevada last updated its online statute if you drag your cursor over the upper left hand corner. The last revision dates appear when highlighted.