Delaware’s Future
I share Prof. Ribstein’s concerns about the federalization of corporate governance contained in the Dodd bill. Though Senator Carper wasn’t able, in the end, to get the proxy access provisions out of the Dodd Bill, which I think were the most troubling, we did eliminate another of Senator Schumer’s ideas. (The corporate governance provisions of the Dodd bill were taken from Sen. Schumer’s “Shareholder Bill of Rights.”) The initial draft of the Dodd Bill included a restriction prohibiting any publicly traded company from having a staggered board. I suspect we have the good work of Senator Carper and Congressman Castle’s offices to thank for their continued work against that provision. The option to have a staggered board is part of the Delaware brand’s advantage. Nearly 80% of Boards and their shareholders used to embrace the staggered election approach, since then some (but not most) companies’ shareholders have pushed, and been successful, in changing to annual elections under existing rules, a development which Delaware’s freedom-of-contract philosophy embraces. Now roughly 50% of publicly traded firms have staggered boards. I should add…this, like most corporate governance changes, is not exclusively a Delaware issue…as Delaware is home to only 50% of publicly traded companies and 60% of the Fortune 500.
