d.It cannot be about the election of directors.D.Medical Committee for Human Rights v. SEC holds that (probably) a shareholder proposal to get Dow to stop producing napalm was includable. 1.This could be argued to be either a personal grievance or an ordinary business operations question. 2.However, Dow avoided the fight, included the proposal and it lost.E.Shareholder proposals have tended to be more successful in regard to poison pills, since it is more possible in those instances that shareholder and director interests do not align.F.Shareholder proposals regarding employment discrimination have generally recently been decided to be excludable as ordinary business operations.G.Rauchmann v. Mobil Corp holds that proposals cannot touch elections ofdirectors (OPEC board member).H.Why do we have shareholder proposals at all when they never work?1.The idea is that they have a “healthy indirect impact” by allowing decisions of directors to be publicized2.We can ask the question of whether a reasonable shareholder would want the ability to make a proposal if they knew every other shareholder could too. It’s not necessarily clear.I.Institutional Investors and Shareholder voting1.In recent years, institutional investors like mutual funds have meant that shareholders are by definition becoming more sophisticated, and have a larger share to care about2.Some have argued that this will change the level of check shareholderscan provide on management3.However, indexing and diversification generally stopped this from happening; no one institutional investor has a particularly high stake in the actions of any one company. IV.Inspection of Books and RecordsA.In general, SEC regulations require that shareholders:1.Show proper purpose2.Show that your interest is related to you as a shareholder.
Business Organizations Outline Autumn 2011Sarah StaudtB.Thomas & Betts Corp v. Leviton Manufacturing holds that books and records cannot be investigated as a pretext, and the shareholder bears the burden of showing proper purpose.1.In this case, Thomas & Betts was a minority shareholder trying to force a merger.2.The shareholder must show, by preponderance of the evidence, that they have a proper purpose. It is not a “greater than normal” burden, however.3.And an interest to acquire the company is antithetical to their interests as shareholders or of the corporation. C.Studebaker v. Gittlin holds that in order to inspect, a shareholder must show that the coalition that they pulled together to reach the minority holding. Threshold was solicited through valid proxy rules. 1.The idea is that “solicitations” will be construed pretty broadly in terms of fitting within the proxy rules. 2.The SEC has liberalized this rule. In SEC rule 14a-1:a.Solicitation doesn’t apply to a communication by a stockholder who didn’t otherwise engage in a proxy solicitationb.So long as the communication is made publicly and is eitheri.Directed to persons whom the stockholder owes a dutyii.