Delaware, Business Judgment and the Death of the Dual Class

You're invited to attend this talk by Charles M. Elson entitled, 'Delaware, Business Judgement and the Death of the Dual Class'

Abstract:

Company founders have been opting to shore up control with voting structures that undercut shareholder voting power, where only a decade ago almost all chose the standard and accepted one-share, one-vote structure. Now, with Snap’s new no-vote structure, a founder can reduce her stake to only a penny and still hold onto control. These low- and no-vote stock ownership structures drastically undercut shareholder influence, undermine corporate governance, and will shift the burden of investment grievances to the courts.

In reviewing board action, courts have historically taken comfort in that, even at controlled companies, markets and corporate democracy will usually do a good enough job constraining management. Dual-class controlled companies, however, are fundamentally different. Unlike at a single-class controlled company, for a dual-class controlled company there may be neither market incentives nor board oversight.

Without board direction and market forces protecting shareholder interests, the burden of monitoring investments will end up on the courts. The judiciary must now determine whether to add heightened review of operational decisions at dual-class controlled companies to the already heightened review of interested transactions. The alternative is promoting a new class of unaccountable and unmotivated corporations.

About the speaker:

Charles M. Elson is the Edgar S. Woolard, Jr., Chair in Corporate Governance and the Director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. He is also “Consultant” to the law firm of Holland & Knight. His fields of expertise include corporations, securities regulation and corporate governance. He is a graduate of Harvard University and the University of Virginia Law School. Professor Elson has written extensively on the subject of boards of directors.

The event is free for attendance.

Location details

Room G.32 (ground floor)
School of Law
Liberty Building
University of Leeds
LS2 9JT

For sat navs, please use the postcode for Moorland Road, LS6 1AN. 

The Liberty Building can also be found on the campus map.