Directors and Officers (1985—1989)
Reflections and Practical Tips on Life in the Boardroom After Van Gorkom
Bayless Manning, 41(1): 1–14 (Nov. 1985)
The decision of the Delaware Supreme Court in Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985), imposed personal liability on outside directors of Trans Union Co., finding that they had agreed to a merger of the company without having adequately made an evaluation of Trans Union stock. The result of the case has been severely criticized. The doctrinal position of the court's opinion, however, can be fitted into the long development of the law governing corporate directors, and, on close reading, the court's opinion will be found to contain a number of practical tips and valuable pointers for the corporate practitioner.
Guidelines for Directors: Planning for and Responding to Unsolicited Tender Offers
Committee on Corporate Laws, 41(1): 209–21 (Nov. 1985) Although unsolicited tender offers pose some very important issues (for example, the government's proper regulatory role), this Report focuses on the responsibility of a board of directors and the issues to be considered by the board in preparing for and in reacting to an unsolicited tender offer. The wide range of actions available to the board are reviewed. Absent an abuse of discretion, and so long as improper motive or disabling self-interest is not present, the actions taken by directors basically will be governed by the business judgment doctrine.
Bondholders and Corporate Governance
Morey W. McDaniel, 41(2): 413–60 (Feb. 1986)
Contrary to popular belief, indentures do not have numerous, detailed covenants to protect bondholders. Other legal and market constraints on stockholder gain at bondholder expense are ineffective. Therefore, directors should have fiduciary duties to protect bondholders as well as stockholders.
Smith v. Van Gorkom: The Business of Judging Business Judgment
Leo Herzel and Leo Katz, 41(4): 1187–93 (Aug. 1986)
In Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985), the Delaware Supreme Court failed to appreciate that, except for intentional wrongs, the market is usually better at judging managerial performance than the courts, that directors usually need to be encouraged to take risks, that good decisionmaking cannot be codified, and that the distinction between the product and the process of board deliberations is difficult.
Guidelines for Directors: Planning for and Responding to Unsolicited Tender Offers—Amendments
Committee on Corporate Laws, 41(4): 1341–42 (Aug. 1986)
This Report was initially published for comment in the November 1985 issue of The Business Lawyer . After revision to accommodate intervening case developments and comments received, this Report was approved by the Committee on Corporate Laws in December 1985, except for the changes set forth herein.
Delaware Supports Directors with a Three-Legged Stool of Limited Liability, Indemnification, and Insurance
E. Norman Veasey, Jesse A. Finkelstein, and C. Stephen Bigler, 42(2): 399–421(Feb. 1987)
This Article discusses the July 1986 amendments to the Delaware General Corporation Law allowing corporations to limit or eliminate the personal monetary liability of directors in certain circumstances and to broaden indemnification rights for directors, officers, employees, and agents.
The Emerging Role of the Special Committee—Ensuring Business Judgment Rule Protection in the Context of Management Leveraged Buyouts and Other Corporate Transactions Involving Conflicts of Interest
Scott V. Simpson, 43(2): 665–90 (Feb. 1988)
In an era of complex corporate transactions, the role of a board of directors is often further complicated by conflicts of interest involving some or all of the members of the board. Recent judicial decisions also indicate that the actions taken by directors may not be upheld in the courtroom unless certain procedural steps are observed in the boardroom. The special committee, consisting of disinterested directors and advised by independent legal and financial experts, has evolved as a mechanism capable of facilitating a careful review of complex issues while at the same time minimizing the effects of actual or potential conflicts of interest. In appropriate circumstances, establishing a special committee may represent the most significant procedural step that a board of directors can take to ensure that its actions will withstand judicial scrutiny.
Evaluating Recent State Legislation on Director and Officer Liability Limitation and Indemnification
James J. Hanks, Jr., 43(4): 1207–54 (Aug. 1988)
The director liability insurance crisis has precipitated legislation by more than forty states to protect corporate directors from personal liability for money damages. This Article reviews and analyzes this legislation, discusses the principal policy issues involved, and considers the likely effects of the legislation in the future. It also suggests ways that corporations and their counsel can maximize the benefits of the new legislation.
Guidelines for the Unaffiliated Director of the Controlled Corporation
Committee on Corporate Laws, 44(1): 211–22 (Nov. 1988)
For purposes of this Report, a "controlled corporation" is defined as a corporation as to which a person, entity, or related group effectively has the power to direct the management and policies. In the same vein, "unaffiliated directors" are directors of a controlled corporation who are not employees, directors, agents, partners, close relatives, or affiliates of the controlling shareholder. The Report addresses some of the problems that may be faced by unaffiliated directors of controlled corporations and provides general guidelines to assist such directors in performing functions related to their unaffiliated status.
The Obligation of a Director of a Delaware Corporation to Act as an Auctioneer
Barry Reder, 44(2): 275–82 (Feb. 1989)
Lower courts and commentators have read Revlon expansively to impose upon directors of Delaware corporations a duty to conduct an auction when a company is for sale. Revlon imposes such a duty only when the corporation is to be broken up. The board may consider the effect of a transaction on a variety of constituencies to determine whether the corporation is being broken up.
The Role of the Board in Derivative Litigation: Delaware Law and the Current ALI Proposals Compared
Michael P. Dooley and E. Norman Veasey, 44(2): 503–42 (Feb. 1989)
This Article analyzes the derivative suit reforms proposed in Part 7 of the ALI's Corporate Governance Project, including a point-by-point comparison of the proposals with Delaware law. The authors critically examine the theoretical case made in Part 7 to support the proposals and find it unpersuasive. They conclude that the ALI proposals are inferior to existing law, inconsistent with other aspects of the corporate governance scheme, and likely to prove excessively costly if implemented.
Guidelines for the Unaffiliated Director of the Controlled Corporation
Committee on Corporate Laws, 45(1): 429–40 (Nov. 1989)
This Report addresses some of the problems that may be faced by unaffiliated directors of controlled corporations and provides guidelines to assist such directors in performing functions related to their unaffiliated status. The problems described in the Report are most often seen in publicly traded corporations with a single controlling shareholder. The Report suggests factors and procedures to be considered under various circumstances by directors who are not affiliated with the controlling shareholder.