August 5, 2011

A New Shareholder Activist Tactic? Kill the Corporate Charter

As noted in this Working Assets alert, a coalition of environmental groups, led by Rainforest Action and Appalachian Voices, is calling on Delaware Attorney General Beau Biden to revoke Massey Energy’s corporate charter. According to this alert (which includes a petition for people to sign), a corporate charter can be revoked when there is “a sustained course of fraud, immorality or violations of statutory law” in Delaware. The activists are seeking to pressure Alpha Natural Resources, which acquired Massey earlier this year, to make changes to its mining operations and replace company executives. Thanks to Gibson Dunn’s Beth Ising for pointing this development out.

Potter Anderson’s John Grossbauer notes: “I don’t believe this type of activist approach has been used before in Delaware. The only thing close are the circumstances in Oberly v. Kirby where the Delaware Attorney General tried to block the sale of a control block of stock of a public company by a Delaware nonprofit corporation. The Attorney General lost this 1991 case because the Delaware Supreme Court said it was not a sale of all or substantially all the nonstock corporation’s assets given its purpose was not to hold the shares of a particular company and it needed to diversify its holdings (an issue with which the Hershey trust wrestled more recently).”

Shareholder Proposal Lawsuit: Merck Wins Summary Judgment Dismissal

As I blogged yesterday, oral argument was held in the US District Court of DC in the PETA v Merck shareholder proposal case. As reflected in this order from the court, Merck prevailed when Judge Jackson dismissed the case. People for the Ethical Treatment of Animals (known as “PETA”) was seeking a court order to force Merck to hold a special meeting – since the annual meeting had passed and the company had excluded PETA’s proposal after obtaining Corp Fin no-action relief – so that shareholders could vote on a proposal that sought to have the company disclose its use of animal testing in in-house and contracted research. As noted in this Legal Time blog:

Hall said this afternoon PETA is weighing appellate options. She noted that Jackson said during the hearing that a more appropriate remedy would have been to seek a preliminary injunction first, a strategy Hall said the group plans to employ if they bring similar suits in the future.

Moxy Vote’s Report on Results of Shareholder Proposals

Yesterday, Moxy Vote released this report providing some stats and color commentary regarding the shareholder proposals submitted by its Advocates voted upon during annual meetings during this proxy season. It’s a nice supplement to ISS’s preliminary post-season report that I blogged about a few days ago…

– Broc Romanek