sues to compel building stadium lights Π Δ Ford as controlling SH decides Ford Motor at Wrigley Field and to have night baseball Co. won’t pay special dividend anymore games Articulate investing in business (smelting owns 80%, argues games = more Δ Π plant) and altruistic intention for welfare of profit his work force argues lights will have deleterious effect Δ Holding: Court leaves smelting plant, but on surrounding neighborhood/negatively orders payment of the special dividends affect patrons bad for profits Dodge (minority SH) offered to sell shares Board considered issue and rejected it no and Ford refused after dividend DoC problem announcement Holding: articulated pro-firm rational basis Δ Can’t easily liquidate for not installing the lights Controlling SH owes FD to minority when acting like a board member Donation to Princeton See also Smith Mfg. – Welfare of employees is not a rational basis Holding: Modest donation to preeminent Instead, say employees will stay “happy institution, within statutory generate good w/ Ford and work harder” more profit will, provide more trained personnel Duty of Care #2) Analysis Duty of Care Board must inform itself of all material information reasonably – available to them prior to decision (Van Gross Negligence) Gorkom – Fully informed, Active board participation (can’t just rely on CEO, ask Qs, etc.), Advice of outside experts (Law firm, investment bank), READ DOCUMENTS ahead of meetings If shows breach, has affirmative defense showing (Cinerama) entire fairness Π Δ §144(a)(3) Entire Fairness – Fair Dealing Fair Price Aggressive bargaining and by whom Magnitude of premium over market price Fiduciary’s knowledge of the business Surmountability of lock-ups Outside valuation/advice Economic and financial considerations Timing of transaction Including assets How transaction is initiated Market value How transaction is structured Earnings How transaction is negotiated Future prospects How it is disclosed to directors Any elements that might affect the intrinsic or How the approval of directors was obtained inherent value of a company’s stock How the approval of the stockholders was obtained Ratification §144(a)(1) Disinterested board members can cleanse vote of interested – §144(a)(2) Vote of SHs can cleanse interested board action – Elements Must be aware of all material facts and SH vote must have not – been otherwise required (Gantler need 2 votes, one to cleanse, one to – approve of action)
Ford as controlling SH decides Ford Motor Co. won’t pay special dividend anymore Articulate investing in business (smelting plant) and altruistic intention for welfare of his work force Holding: Court leaves smelting plant, but orders payment of the special dividends Dodge (minority SH) offered to sell shares and Ford refused after dividend announcement Can’t easily liquidate Controlling SH owes FD to minority when acting like a board member Welfare of employees is not a rational basis Instead, say “happy employees will stay w/ Ford and work harder” more profit Π sues Δ to compel building stadium lights at Wrigley Field and to have night baseball games Δ owns 80%, Π argues games = more profit Δ argues lights will have deleterious effect on surrounding neighborhood/negatively affect patrons bad for profits Board considered issue and rejected it no DoC problem Holding: Δ articulated pro-firm rational basis for not installing the lights See also Smith Mfg. – Donation to Princeton Holding: Modest donation to preeminent institution, within statutory generate good will, provide more trained personnel Duty of Care #2) Analysis Duty of Care – Board must inform itself of all material information reasonably available to them prior to decision (Van Gorkom – Gross Negligence) Fully informed, Active board participation (can’t just rely on CEO, ask Qs, etc.), Advice of outside experts (Law firm, investment bank), READ DOCUMENTS ahead of meetings If Π shows breach, Δ has affirmative defense showing entire fairness (Cinerama) §144(a)(3) – Entire Fairness Fair Dealing Fair Price Aggressive bargaining and by whom Fiduciary’s knowledge of the business Outside valuation/advice Timing of transaction How transaction is initiated How transaction is structured How transaction is negotiated How it is disclosed to directors How the approval of directors was obtained How the approval of the stockholders was obtained Magnitude of premium over market price Surmountability of lock-ups Economic and financial considerations Including assets Market value Earnings Future prospects Any elements that might affect the intrinsic or inherent value of a company’s stock Ratification §144(a)(1) – Disinterested board members can cleanse vote of interested §144(a)(2) – Vote of SHs can cleanse interested board action Elements – Must be aware of all material facts and SH vote must have not been otherwise required (Gantler – need 2 votes, one to cleanse, one to approve of action)
Corporations%20Arlen%20Fall%202012.docx