The newly-installed chief justice of the Delaware Supreme Court has certainly seen his share of activist investors, during his 16 years on the state’s Court of Chancery, one of the most important corporate courts in the country. And he’d like to see fewer of them.
In an article in the most recent Columbia Law Review, Leo Strine argues for more limits on corporate governance votes, writing that the recent “deluge” threatens to “turn the corporate governance process into a constant ‘Model United Nations’ where managers are repeatedly distracted by referenda on a variety of topics proposed by investors with trifling stakes.”
According to Strine, the stakes for the companies are not so trifling: In addition to the distraction to management, companies are forced to pay handsomely to defend themselves, he said. And the number of votes makes it impossible for institutional investors to give due consideration to all of them.
To remedy the situation, Stine argues that investors should have to pay to submit proposals at a company’s annual meeting. In addition, certain votes, such as on pay, should be limited to once every three or four years.
Strine also wants to make activist hedge funds disclose more about their positions more quickly.