Comments on: Loser-pays by consent in corporate governance? https://www.overlawyered.com/2014/05/loser-pays-corporation/ Chronicling the high cost of our legal system Fri, 16 May 2014 20:21:36 +0000 hourly 1 By: DEM https://www.overlawyered.com/2014/05/loser-pays-corporation/comment-page-1/#comment-285265 Fri, 16 May 2014 20:21:36 +0000 http://overlawyered.com/?p=44935#comment-285265 Bob, on a related note, you always have the option to vote with your feet, or to not buy in the first place. I for one will never buy a share of Google after the founders’ machinations. On the other hand, many companies have proven time and again to be quite shareholder-friendly. That’s where my money goes.

]]> By: Boblipton https://www.overlawyered.com/2014/05/loser-pays-corporation/comment-page-1/#comment-285102 Thu, 15 May 2014 22:40:11 +0000 http://overlawyered.com/?p=44935#comment-285102 Yes, it would, Matt. However, let’s get real here. The Delaware Court of Chancery has consistently ruled against shareholder rights. This might have made sense when the board of directors consisted of the people who substantially owned the business. However, recent decisions like permitting the founders of Google, who foresaw that their continuing sales of shares would cause their position to drop below majority share, decided to convert those shares into a superior class; allowing Dell to delay reporting returns and reset voting on the privatization of the company; and their permitting companies to install poison pill provisions: these serve the managers and not the company nor its shareholders and simply serve to sever the connection between ownership and control.

I am in favor of loser pays. I simply find it appalling that its piecemeal installation, while sensible in terms of a lot of nuisance suits, can and will be used to insulate management from their responsibilities towards their employers.

]]> By: MattS https://www.overlawyered.com/2014/05/loser-pays-corporation/comment-page-1/#comment-285093 Thu, 15 May 2014 21:44:28 +0000 http://overlawyered.com/?p=44935#comment-285093 Bob,

Wouldn’t a change to the corporate bylaws have to be passed by a shareholder vote? I don’t think that would be as legally iffy as you think, and certainly not as morally iffy.

]]> By: Boblipton https://www.overlawyered.com/2014/05/loser-pays-corporation/comment-page-1/#comment-285076 Thu, 15 May 2014 20:23:01 +0000 http://overlawyered.com/?p=44935#comment-285076 On a more solemn level, this sort of change in corporate rules strikes me as morally, if not legally iffy. If I purchase shares and the corporate structure is later amended by limitations on the right to sue (as here) or changes in share structure (a la Google) or the more common habit of setting up poisoned pill rules that should an unsanctioned shareholder gain “too many” shares, various actions are taken — in all of these cases I lose some means of recourse save to throw up my hands and sell my shares. My rights as a minority shareholder are lessened. While the Delaware Court of Chancery — a wholly owned subsidiary of E.I. DuPont de Nemours — doubtless felt correctly that far too many lawsuits were being filed to hold Boards of Directors hostage, this strikes me as going too far in the other direction.

Bob

]]> By: Boblipton https://www.overlawyered.com/2014/05/loser-pays-corporation/comment-page-1/#comment-285012 Thu, 15 May 2014 11:44:56 +0000 http://overlawyered.com/?p=44935#comment-285012 Can I do the same if I move to Delaware?

Bob

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