Page 151 - מיזוגים ורכישות - פרופ' אהוד קמר 2022
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The court’s long discussion of the Blasius test illustrates why this is so. The Blasius
test is not, in the traditional sense, a standard that measures whether directors are
properly acting as fiduciaries. Indeed, in the original Blasius case, as the Liquid audio court
discusses, the Chancery Court found that the board had satisfied its duty of good faith
and there was no question that the board was fully informed. While the court in Blasius
suggested that the thwarting of a stockholder vote involved an "unintentional violation
of the duty of loyalty," the Blasius standard is best understood not as addressing fiduciary
duties, but rather as protecting a corporate governance regime whose validity ultimately
rests on the stockholder franchise. In other words, even those directors who fully satisfy
their fiduciary duties may not thwart, impede or interfere with a valid stockholder vote
because the legitimacy of directors’ power to act depends on the stockholder vote. Thus,
as a matter of corporate law, certain decisions (such as the composition of the board)
must be made by stockholders, not by directors. Board action that interferes with the
stockholders’ ability to make those decisions does not simply implicate the board’s
fiduciary duties: it implicates substantive corporate law.
In contrast, the Unocal test is based on traditional fiduciary principles. It is
applicable whenever directors, acting within the sphere of activity that corporate law
assigns to them, take actions that are "defensive," i.e., actions that preserve their
directorships. For example, a board of directors may choose to repurchase the shares of
an insurgent stockholder or to declare a dividend consisting of a poison pill right. Such
actions may make it less likely for the company to be acquired, or even for the directors
to be voted out of the office, but unless they directly interfere with stockholder voting,
they do not threaten the basic underpinning of corporation law. However, the courts
have held that when a board acts defensively, there is the "omnipresent specter" that the
directors may be acting to preserve their own offices, i.e., acting in their own interests,
rather than acting solely for the purpose of protecting the stockholders. Accordingly, the
courts apply an "enhanced" form of business judgment review. Thus, unlike Blasius, the
Unocal test truly does spring from fiduciary principles.
Application of Blasius to Increase in Board Size
Of course, the two tests are likely to overlap, since actions that thwart a
stockholder vote may not imply only corporate governance issues, but also issues
concerning whether the directors were acting in part to protect their own interests. The
Supreme Court’s decision in Liquid audio is reflective of this overlap, and of the
significance of the distinction: Blasius is more than a strong form of Unocal. Because
Liquid Audio’s stockholders had, under the charter and by-laws of the corporation, put
into process a proxy contest that was to have a particular defined result, the board was
prohibited from taking action that might impede that contest, even if, from a purely
fiduciary perspective, the board action appeared reasonable:
147
test is not, in the traditional sense, a standard that measures whether directors are
properly acting as fiduciaries. Indeed, in the original Blasius case, as the Liquid audio court
discusses, the Chancery Court found that the board had satisfied its duty of good faith
and there was no question that the board was fully informed. While the court in Blasius
suggested that the thwarting of a stockholder vote involved an "unintentional violation
of the duty of loyalty," the Blasius standard is best understood not as addressing fiduciary
duties, but rather as protecting a corporate governance regime whose validity ultimately
rests on the stockholder franchise. In other words, even those directors who fully satisfy
their fiduciary duties may not thwart, impede or interfere with a valid stockholder vote
because the legitimacy of directors’ power to act depends on the stockholder vote. Thus,
as a matter of corporate law, certain decisions (such as the composition of the board)
must be made by stockholders, not by directors. Board action that interferes with the
stockholders’ ability to make those decisions does not simply implicate the board’s
fiduciary duties: it implicates substantive corporate law.
In contrast, the Unocal test is based on traditional fiduciary principles. It is
applicable whenever directors, acting within the sphere of activity that corporate law
assigns to them, take actions that are "defensive," i.e., actions that preserve their
directorships. For example, a board of directors may choose to repurchase the shares of
an insurgent stockholder or to declare a dividend consisting of a poison pill right. Such
actions may make it less likely for the company to be acquired, or even for the directors
to be voted out of the office, but unless they directly interfere with stockholder voting,
they do not threaten the basic underpinning of corporation law. However, the courts
have held that when a board acts defensively, there is the "omnipresent specter" that the
directors may be acting to preserve their own offices, i.e., acting in their own interests,
rather than acting solely for the purpose of protecting the stockholders. Accordingly, the
courts apply an "enhanced" form of business judgment review. Thus, unlike Blasius, the
Unocal test truly does spring from fiduciary principles.
Application of Blasius to Increase in Board Size
Of course, the two tests are likely to overlap, since actions that thwart a
stockholder vote may not imply only corporate governance issues, but also issues
concerning whether the directors were acting in part to protect their own interests. The
Supreme Court’s decision in Liquid audio is reflective of this overlap, and of the
significance of the distinction: Blasius is more than a strong form of Unocal. Because
Liquid Audio’s stockholders had, under the charter and by-laws of the corporation, put
into process a proxy contest that was to have a particular defined result, the board was
prohibited from taking action that might impede that contest, even if, from a purely
fiduciary perspective, the board action appeared reasonable:
147
