CHANCERY COURT DECLINED TO APPLY BLASIUS “COMPELLING JUSTIFICATION” STANDARD IN SUSTAINING BOARD’S REJECTION OF OPPOSITION SLATE UNDER “COMMONPLACE” ADVANCE NOTICE BYLAW
Robert S. Reder & Gabrielle M. Haddad | 75 Vand. L. Rev. En Banc 195 (2022) |
Under § 141(a) of the Delaware General Corporation Law (“DGCL”), “the business and affairs of every corporation . . . shall be managed by or under the direction of a board of directors . . . .” In light of this sweeping grant of authority to corporate boards, Delaware courts historically have zealously protected the stockholder franchise—long regarded as “sacrosanct”—and, in particular, the right of stockholders to nominate and vote for directors. For instance, in Blasius Indus., Inc. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988) (“Blasius”), the Delaware Court of Chancery (“Chancery Court”) famously opined that “[a]ction designed principally to interfere with the effectiveness of a vote inevitably involves a conflict between the board and a shareholder . . . .” To account for this conflict, when the board acts “for the principal purpose of impeding the exercise of stockholder voting power,” the board “bears the heavy burden of demonstrating a compelling justification for such action.” Over time, this form of “enhanced scrutiny” has proved a difficult burden for incumbent boards to satisfy.
Robert S. Reder
Gabrielle M. Haddad