In essence, this case brings to the fore one of the most basic questions animating all of corporate law, which relates to the allocation of power between directors and stockholders. That is, "when, if ever, will a board's duty to 'the corporation and its shareholders' require the board to abandon concerns for long term values (and other constitutencies) and enter a current share value maximizing mode?" More to the point, in the context of a hostile tender offer, who gets to decide when and if the corpoation is for sale?The Court sided with the Board.
Lingering in the back of the Court's mind, one might have found the looming shadow of the 2008 financial crisis -- a crisis whose first manifestations occurred at the expense of the Enron employees who lost their life savings to corporate greed and pressures to inflate short term stock prices.
Pressures that many blame on shareholders. Including, so it seems, Delaware's estimable Court of Chancery. So progressives -- be forewarned. Delaware's allegedly "business friendly" environment may not be quite so stakeholder unfriendly.
The conflict over the allocation of governance power between boards and shareholders is, of course, overly simplistic. Not every shareholder is alike. Some are in it for the long run. Some want to see their companies do good things. Some would serve as admirable leaders of the corporate bastion. But some wouldn't. Some would strip away corporate assets to finance leveraged buyout transactions and walk away with a boatload of cash... and a truck full of pink slips to hand out.
So, unless and until the law takes account of "good" shareholders and "bad" shareholders, best to put it in the hands of supposedly "neutral arbiters." The Board.
And the conflict fails likewise to give voice to other corporate constituences. They must rely on that same Board -- members of whom they do not elect. What would happen if employees governed companies?
Delaware Courts have no answer for that.
