The economic downturn has led to criticism of corporate management and lax oversight by directors. Probably not coincidentally, Delaware, seen as a bellwether of U.S. corporate law, recently passed some significant corporate amendments that give shareholders more rights, especially shareholders challenging directors. Some of the more significant amendments include:
- Permitting corporate by-laws to require proxy materials to include names of individuals nominated by a shareholder and not just those individuals nominated by the board of directors;
- Permitting by-laws to provide for reimbursement of shareholders soliciting proxies for election of directors; and
- Permitting a Delaware court to remove a director who has been convicted of a felony in connection with the duties of the director to the corporation or who has been judged by a court to have committed a breach of the duty of loyalty to the corporation.
It is too early to determine the practical effect of these amendments on corporate management. The provisions relating to nomination of directors by a shareholder and reimbursement of expenses are optional and depend on the company's by-laws. In the next shareholder materials in 2010, there will probably be a number of proposals to add these provisions to a corporation's by-laws. The result might depend on shareholder perceptions toward corporate management at that time.