A growing number of public companies have recently added directors who are designees of activist hedge funds or other financial investors, often following a proxy contest or as a result of the settlement of a threatened or pending contest. These companies are now facing difficult questions about the flow of confidential information to and through these “constituency” directors, complicated by the perception or reality that these designees may be acting on behalf of or favoring the interests of their sponsors. A number of recent Delaware decisions have addressed this information flow and highlight two key questions that companies must grapple with:
To what extent are directors, regardless of provenance, entitled to full and equal access to corporate information?
Are directors designated by investment funds or other sponsors permitted to share information received in that capacity with their sponsors?
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