Back in July, I blogged about the unprecedented dispute between Ben & Jerry’s and its sole shareholder, Unilever, regarding the sale of Ben & Jerry’s products in Israeli-occupied territories.  When Ben & Jerry’s was sold to Unilever, Unilever entered into a shareholders’ agreement with Ben & Jerry’s, whereby it promised that the board of directors would be largely self-perpetuating (i.e., continuing directors would nominate their successors), and the board would have authority to maintain the company’s social mission.  Unilever, via its CEO selection, would have authority over financial and operational decisions.  When the Ben & Jerry’s board objected to selling the company’s products in the West Bank, Unilever decided to transfer the entire West Bank business to an Israeli operator, bringing their spheres of authority into conflict: was this a social decision, or an operational one?  Ben & Jerry’s, under the direction of the board, sought a preliminary injunction to stop the transfer, arguing that it was the former; Unilever opposed on the grounds that it was the latter.

In my earlier blog post, I wrote about the unusual nature of the arrangement and the ambiguity surrounding the real parties in interest.  That ambiguity was not directly at issue…

Randall Thomas, Robert Thompson, and Harwell Wells have posted Delaware’s Shifting Judicial Role in Business Governance on SSRN (here). The abstract is below, but I thought it worth highlighting the following two quotes from the paper:

• For 2021, 28 percent of Delaware’s state budget was estimated to be provided by corporate franchise tax and business entity fees deriving from corporations, LLCs, LPs, and other business entities organized under its laws.
• LLCs now provide Delaware almost thirty percent of its budgetary income from entity chartering, up from the low single digits twenty years ago.

Abstract

This Article examines the changing nature of judicial review of governance in American businesses. Drawing on a detailed study of all cases filed in 2018 in Delaware, the country’s dominant jurisdiction for corporate law, and a previous study of such litigation at the turn of the century, it reveals fundamental changes in corporate law issues brought to court in the twenty-first century. Twenty years ago, the chief task of the Delaware Court of Chancery, the nation’s preeminent business court (and the Delaware Supreme Court that hears all appeals from that court), was to apply fiduciary duties to resolve disputes over the governance of publicly…

I received the following in an email and thought it might be of interest to BLPB readers.

MEDIA ADVISORY

MONDAY: NCLA Presents Oral Argument in Case Challenging Nasdaq Board Diversity Rules  

WHO: NCLA Senior Litigation Counsel Peggy Little, NCLA Litigation Counsel Sheng Li

WHAT: NCLA will appear before Judges Carl E. Stewart, James L. Dennis, and Stephen A. Higginson, in the U.S. Court of Appeals for the Fifth Circuit for a hearing in the case of National Center for Public Policy Research v. SEC.

On August 6, 2021, SEC narrowly approved a Rule requiring disclosure of the aggregate race, gender, and sexual preference of Nasdaq-listed companies, with two of five Commissioners dissenting. The Board Diversity Rule subjects Nasdaq-listed companies to the following requirements: (a) they must disclose information about their board’s self-identified gender, race, and sexual preference; and (b) either (i) meet minimum quotas of individuals of a certain gender, racial, and sexual preference, or (ii) publicly explain why the board does not meet such quotas.

The Board Diversity Rules fall outside of the agency’s regulatory authority.

WHERE: Room 209 of the Wisdom Courthouse, 600 S Maestri Pl, New Orleans, LA 70130

The hearing is open to the public.…

I’ll admit it – I frequently choose blog post topics based on what I can write quickly, and since obviously I’ve been following the Twitter case closely, that’s the topic for today.

This post is really meant as an explainer of the legal state of play; lawyers who have been following closely probably already know most of this, but for anyone else, this is for you.

It’ll be really, really long, so I cut

At the urging of Governor DeSantis, Florida’s State Board of Administration recently adopted a new resolution changing the state investment policy.  As I read the language, it either does next to nothing or pointlessly blinds Florida’s asset allocators.  

Consider the language in the resolution instead of the overheated political press releases going out around it.  The resolution limits investment criteria to “pecuniary factors.”  A “pecuniary factor” is  one that is”expected to have a material effect on the risk and return of an investment based on appropriate investment horizons consistent with the fund’s investment objectives and funding policy.  It expressly excludes “the consideration of the furtherance of social, political, or ideological interests.” (emphasis added). The resolution also directs that its capital allocators may not “subordinate the interests of the participants and beneficiaries to other objectives and may not sacrifice investment return or take on additional investment risk to promote any non-pecuniary factors.”

This resolution seemingly has no impact on the ability of Florida funds to consider ESG factors when allocating capital.  Imagine you’re an asset allocator with a long time horizon and trying to evaluate between investing in different companies.  One company has critical infrastructure situated in areas highly likely…

One of my Westlaw alerts this morning included: Robert T. Miller, How Would Directors Make Business Decisions Under A Stakeholder Model?, 77 Bus. Law. 773 (2022). Here is the abstract:

Under the stakeholder model of corporate governance, directors may confer benefits on corporate constituencies other than shareholders without regard to whether doing so produces benefits for the shareholders even in the long run. Contrary to what advocates of stakeholder theory often say, stakeholder theory does not put all corporate constituencies on a par, letting directors give equal consideration to the interests of all constituencies. Rather, stakeholder theory uniquely disadvantages shareholders, allowing directors to transfer value from shareholders to other constituencies but never from other constituencies to shareholders. More importantly, although critics of the stakeholder model going back to Berle have complained that the model provides directors with no clear standard by which to make business decisions, this criticism grossly understates the problem. In fact, the stakeholder model says nothing at all about which interests of the various constituencies are legitimate interests, much less about how such interests should be balanced against each other. As a result, the model provides no normative criteria of any kind on the basis of

…

A while back, when the Twitter/Musk mishegoss was just gearing up, there was a whole political aspect to the thing whereby conservatives accused Twitter’s board of intentionally stonewalling Musk’s takeover bid in order to advance their liberal commitments.  At the time, I said that it was comforting to know that whatever legal battles resulted, they would be decided by the relatively neutral principles extant in Delaware law.

Which is why I was so pleased to see Is Corporate Law Nonpartisan?, by Ofer Eldar and Gabriel Rauterberg, forthcoming in the Wisconsin Law Review, pop up on SSRN.  The authors use Carney v. Adams – the case where the Supreme Court considered, but did not decide, whether Delaware’s party-balance mandate for its judiciary violates the First Amendment – as a jumping off point, and from there conclude that many states’ corporate law is shaped by their party politics.  Delaware, by contrast, has been able to compete successfully for corporate charters because of its deliberately nonpartisan approach, which assures dispersed shareholders that their interests will not be subrogated to those of concentrated local stakeholders.  They also point out that Delaware can maintain this nonpartisan commitment in part because it’s such a small…