Subverting Shareholder Rights: Lessons from News Corp.’s Migration to Delaware
This Article critically analyzes News Corp.’s reincorporation in Delaware against the backdrop of two major contemporary corporate governance debates relating to shareholder empowerment and convergence theory. Legal scholars opposing greater shareholder power often argue that the lack of shareholder participatory rights under U.S. law provides evidence that such rights are neither desired nor valued by investors. Also, an underlying assumption of convergence theory is that a unified “Anglo-American” model of shareholder protection exists, suggesting that shareholder rights are similarly restricted throughout the common law world.
This Article challenges both these assumptions by means of a detailed case study of News Corp.’s migration from Australia to Delaware. News Corp.’s original reincorporation proposal prompted a revolt by a number of institutional investors, who argued that a move to Delaware would strengthen managerial power and reduce shareholder rights. The institutional investors were particularly concerned about the effect of the move on the ability of the board of directors to adopt anti-takeover mechanisms, such as poison pills, which are not generally permissible under Australian law.
This Article places News Corp.’s reincorporation in Delaware within the framework of contemporary corporate governance theory and debate. It also uses the reincorporation to highlight a number of significant, but underappreciated, differences between U.S. corporate law and the law of other common law jurisdictions. Specifically, this Article shows how News Corp.’s migration from Australia to Delaware effectively subverted shareholder rights. The News Corp. reincorporation, in sum, has significant implications for Delaware law generally, and for current shareholder empowerment developments in the United States.