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The Shareholder Forum

The Shareholder Forum supports investor interests in corporate enterprise value with services that require independence – and that may benefit from the Forum’s network resources and recognition for advocacy of long term investor interests – to assure a definition of relevant issues and fair access to information that can be relied upon by both corporate and investor decision-makers.

The policies that provide a foundation for the Forum’s marketplace functions have been carefully developed and tested to allow any investor to participate in its communications, either anonymously or visibly, without acting in concert. Established originally to accommodate professional fund managers and securities analysts, this SEC -defined independent moderator function has proved to be consistently effective in managing orderly processes of issue definition for rational analysis by all of the various principals, fiduciaries, advisers and corporate managers who are responsible for informed decisions.

Initiated in 1999 by the CFA Society of New York (at the time known as the New York Society of Security Analysts) with lead investor and former corporate investment banker Gary Lutin as guest chairman to address the professional interests of its members, and independently supported by Mr. Lutin since 2001, Forum programs have achieved wide recognition for their effective definition of important issues and orderly exchange of the information and views needed to resolve them. The Forum's ability to convene all key decision-making constituencies and influence leaders has been applied to subjects ranging from corporate control contests to the establishment of consensus marketplace standards for fair disclosure, and has been relied upon by virtually every major U.S. fund manager and the many other investors who have participated in programs that addressed their interests.

After concluding a collaborative public program addressing broad policy interests in 2012-2015, the Forum has resumed its original focus on company-specific investor decisions, with particular encouragement of private programs to achieve carefully defined objectives. Currently important applications of the Forum’s independent management of communication exchanges include the support of corporate managers who wish to provide the leadership expected of them by responding to either shareholder engagement or activist challenges with orderly reviews of issues relevant to long term investor interests. The Forum continues, of course, to offer this support to investors concerned with the use of their capital to produce goods and services.

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For a copy of the decision addressed in the article below, see

For another case addressing similar issues, see


The Harvard Law School Forum on Corporate Governance and Financial Regulation, February 19, 2010 posting



Delaware Court of Chancery Addresses Proxy Contest Mechanics and Vote Buying

Posted by Trevor Norwitz, Wachtell, Lipton, Rosen & Katz, on Friday February 19, 2010 at 9:01 am

Editor’s Note: Trevor Norwitz is a partner in the Corporate Department at Wachtell, Lipton, Rosen & Katz, where he focuses on mergers and acquisitions, corporate governance and securities law matters. This post is based on a Wachtell Lipton client memorandum by Mr. Norwitz and William Savitt.

In a recent decision involving dueling consent solicitations, the Delaware Court of Chancery cast welcome light on the “foggy” mechanics of proxy solicitations and offered guidance on “vote-buying” in corporate control contests. Kurz v. Holbrook., C.A. No. 5019-VCL (February 9, 2010).

The case involved a contest for control of EMAK Worldwide, a “deregistered, poorly performing microcap corporation” with one large preferred stockholder and an otherwise “diffuse” stockholder body. An insurgent slate sought to remove two directors and elect replacements, thereby taking control of the company. The incumbent group sought to amend EMAK’s by-laws to reduce the size of the board, thereby effectuating the dismissal of certain sitting directors, mooting the insurgents’ attempt to elect new directors, and ensuring a majority position for the large preferred stockholder. After a hard-fought contest, the incumbent’s by-law provisions obtained a close majority of consents. A few days later, however, the insurgent slate secured a majority of consents as well, but only after insurgents purchased 150,000 shares needed to provide a bare 50.89% majority. But the inspector of elections then disallowed some 1,000,000 shares held in “street name” because they were not accompanied by a DTC “universal proxy,” thus maintaining the incumbent group majority. The insurgents sued, challenging both the validity of the by-law and the invalidation of their “street name” votes.

The court ruled in favor of the insurgents. Marking a clear and considered revision of established law, Vice Chancellor Laster held that “street name” holders — banks and brokers who appear on the DTC participant listing (or “Cede breakdown”) — are “stockholders of record” for purposes of determining which shareholders have the right to vote or act by written consent. Although dispensing with the need for a DTC “universal proxy” in this case, the Vice Chancellor took care to reaffirm the traditional distinction between record holders and beneficial holders. It remains Delaware law that only record holders can vote, but in ascertaining who those record holders are, companies must now look behind Cede & Co. to the participating banks and brokers on the Cede breakdown on the record date. As the decision demonstrates, the new rule may be decisive in a close consent solicitation contest, even if its impact in the average case may not be noticeable to those not directly involved in the plumbing of the voting system. And the decision indicates that Chancery will consider revising even long-standing rules that risk to disenfranchise stockholders. In all events, the scholarly opinion provides fascinating reading for those interested in the historical evolution and working of our arcane proxy system.

In another matter of first impression, the court invalidated the by-law amendment that purported to reduce the size of the board to fewer than the number of sitting directors, ruling that it is impermissible under the Delaware statute to “metaphorically pull[] [directors’] seats out from under them.” In similar vein, the court noted that a bylaw purporting to impose a requirement that would disqualify a sitting director and thereby terminate his service would be invalid under Delaware law.

The decision also rejected the incumbents’ claim that the insurgents had engaged in improper “vote buying.” Dismissing the view that Delaware law has no restrictions on vote buying by third parties, the Vice Chancellor expressed that Delaware law should not hesitate to provide a remedy where the decoupling of economic ownership of shares from their voting rights proves deleterious, particularly where there is fraud or disparity of information. But where, as in this case, the party buying the votes assumes the economic risks of ownership, the court will perceive no “legal wrong” just because the buyer is primarily interested in securing swing votes needed to win an election. The decision thus underscores the potential for creative campaigning, and the need for careful planning, in the context of a contested election for corporate control.



© 2010 The President and Fellows of Harvard College




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