David Weidner of the WSJ has a good post today asking the
question, "Is Leo Strine Serious?" Of course,
I'll admit to being a fan of Leo Strine's wit. If you read a lot of case
law, which is the punishment for being a law professor, it's a wonderful thing
to occasionally read an opinion where the writer's personality comes shining
through. That said, Weidner is expressing a frustration that's bigger
than simply Chancellor Strine and El Paso. The frustration is with the
corporate law itself. Reuter's Allison Frankel puts it this way:
But is this really how we want the court system to work?
Strine said he was afraid to enjoin the shareholder vote because Kinder Morgan
could then walk away from the proposed acquisition, costing El Paso
stockholders billions in lost equity. Does that mean the Delaware courts are unwilling
to act against any single-bidder deal, no matter how tainted the process that
That's a good question. I guess it depends on how smart -
or independent - we think shareholders are. If in cases like this one where
there is a single bidder offering a premium, do we think shareholders are smart
enough to read Strine's opinion and decide for themselves that it's a bad deal
and reject it? Remember, the arguments and opinion are all before the
shareholder vote. If I were an El Paso shareholder, I'd read the opinion
and vote "no". Then, I'd try to find a way to eject Foshee from
the board. But I'm not an El Paso shareholder, at least not directly.
but, maybe we think that shareholders are simply fools.
Unthinking types who couldn't be bothered to vote "no" -
because they are rationally apathetic or because they aren't paying attention.
That's possible, too. In which case, shareholders need Chancellor Strine
to stand up on their behalf and rule - this goes too far. Maybe.
But, if that's what shareholders are really like - and
who's to say they aren't - then why do we spend so much time arguing for
increased shareholder access to proxies, majority voting, and a host of other
good governance measures that put the shareholders at the center of events? If
shareholders are too checked-out to vote down the El Paso transaction following
Strine's opinion, why do we think they'll be any better at selecting an
I feel Strine's pain. Really, I do. It's a no
win. He does his best to shame the executives (Prof Bainbridge on corporate shaming) and make it
clear to shareholders that they should vote down the transaction, but without
sticking his judicial nose too far in. It's a balance that leaves no one
all that happy, especially him.
M&A Law Prof Blog, hosted by Brian JM Quinn, for blogs on legal
developments in corporate governance and mergers & acquisitions.
more information about LexisNexis products and solutions connect with us
through our corporate site.