Shareholders’ Right to Review the Adoption and Continuation of a Takeover Defense Plan

Is the Fleming Decision Dead on Arrival?

In this note, the author examines the rights of shareholders to review actions of the board of directors in matters of corporate governance. Over the last few decades, the traditional duties of the board of directors to manage corporate affairs have been challenged as share-holders become more active and unified. A recent corporate governance case in Oklahoma, International Brotherhood of Teamsters v. Fleming Cos., finally has addressed the balance of the corporate rights and duties between the board and the activist shareholders. The decision increased the range of shareholder power in the takeover context, holding that shareholders have the right to review and force the redemption of a corporation's poison pill. The author contends that for Fleming to have a serious effect on corporate law, other state courts, and more specifically, Delaware state courts, must adopt a similar analysis. The author, however, finds this occurrence unlikely and believes that the Fleming court failed to analyze the issues correctly. To comprehend the problem underlying the Fleming decision, the author analyzes the traditional corporate model and the development of the board of directors' duties in the takeover context. Moreover, he looks to both traditional Delaware precedents and recent Delaware case law to support his contention. The author proposes that instead of adopting decisions like Fleming, courts should recognize the preclusive effects of multiple takeover defenses and attempt to mitigate them accordingly to deter board entrenchment.

The full text of this Note is available to download as a PDF.