Chicago-Kent Law Review
Volume 65
Issue 3 Symposium on the Seventh Circuit as a
Commercial Court
Article 12
October 1989
Director's Responsibilities and Shareholders'
Interests in the Aftermath of Paramount
Communications v. Time, Inc.
Robert E. Bull
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Recommended Citation
Robert E. Bull, Director's Responsibilities and Shareholders' Interests in the Aftermath of Paramount Communications v. Time, Inc., 65 Chi.-
Kent. L. Rev. 885 (1989).
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DIRECTORS' RESPONSIBILITIES AND SHAREHOLDERS'
INTERESTS IN THE AFTERMATH OF PARAMOUNT
COMMUNICATIONS V TIME, INC.
ROBERT E. BULL*
INTRODUCTION
One reason for the formation of corporations was the desire of busi-
nessmen to establish a fund of property distinct from the property of any
of the members' or their debts, and from the vagaries of descent and
distribution when the members died.' A further purpose in incorporat-
ing was the maintenance of the members' individual property separate
from that of the corporation and, presumptively, free from claims of the
corporation's creditors. 2 The structure of corporate control can be
viewed as pyramidal in nature, with ...
The document summarizes the new Treasury regulations under Internal Revenue Code Section 385 regarding the treatment of debt versus equity in corporations. The regulations aim to provide objective tests to determine if an interest in a corporation should be treated as stock or indebtedness for tax purposes. While the regulations may eliminate controversy in some cases, they will also cause problems for small, closely held corporations. The document discusses some of the binding determinations in the regulations regarding debt instruments that are convertible into equity and loans guaranteed by shareholders.
Commercial & Complex Litigation Newsletter – Hot Topics That Impact Your Busi...CohenGrigsby
In this issue, Successor Liability for Environmental Liabilities by Julie W. Vanneman, PA Adopts the Revised Uniform Arbitration Act: What You Need to Know by Katie R. Jacobs, and The Key to Your CGL Policy: The Misunderstood Word: “Occurrence” by Mark A. May
This document provides a summary of a summative assignment on corporate social responsibility. It discusses how CSR can be defined as corporations having legal, ethical and philanthropic responsibilities beyond shareholder wealth maximization. It will examine minimum legal expectations of CSR in different jurisdictions like Australia and China. It argues that CSR is a voluntary moral expectation rather than a legal duty. This is illustrated by examining CSR practices of Australian mining companies and Apple. While these companies adopted many CSR policies and commitments, they failed to consistently implement them, especially when it came to issues like workers' rights and conditions. This shows that reputational risk was a main driver for CSR adoption, but other duties like profit-making could outweigh CSR in practice.
This study uses regression analysis to develop a model for predicting the likelihood of a large public company's survival through the bankruptcy process. It analyzes data on over 1,000 bankruptcies filed since 1979 to identify 11 variables that are statistically significant predictors of survival. These variables include the company's pre-bankruptcy financials, characteristics of the bankruptcy case like the appointment of creditors committees, and attributes of the presiding judge. The model enables calculation of each company's predicted survival probability at the time of its bankruptcy filing. The study aims to help parties make better decisions during cases and increase overall survival rates, particularly for riskier firms, by assigning cases to more experienced judges.
This chapter discusses the motivations for companies to engage in share buybacks. Some of the key reasons include: returning surplus cash to shareholders, increasing earnings per share, stabilizing the share price, using it as a defense against takeovers, facilitating shareholder exit, and signaling to the market that the shares are undervalued. However, buybacks could also be abused to manipulate the share price or entrench management against takeovers. The motivations discussed provide context for understanding the regulations surrounding share buybacks in subsequent chapters.
This document summarizes tools available in bankruptcy law that can help "old economy" businesses transition to the "new economy". It discusses how bankruptcy can provide a breathing spell through automatic stays on collections and the ability to reject unprofitable contracts. It also describes how selling assets or the entire business through Section 363 can allow restructuring. International bankruptcy jurisdiction and confirming a plan of reorganization to emerge from bankruptcy are also summarized as ways bankruptcy law can facilitate this economic transition.
Corporations obtain financial resources from two main sources: shareholders and debt holders. Shareholders are concerned with maximizing the firm's value and their return, while debt holders focus on the firm's ability to repay principal and interest. There are agency problems that arise between these groups due to the separation of ownership and control of corporations. Managers may make decisions that benefit themselves over shareholders. Debt holders also conflict with shareholders if risky projects are undertaken that could jeopardize the firm's solvency. Efficient solutions aim to align the interests of all parties.
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This document discusses the doctrine of maintenance of capital and creditors' protection in limited liability companies under Indian law. It provides an overview of the relevant provisions in the Indian Companies Act, 1956 and the proposed Companies Bill, 2011. Both laws place restrictions on reducing share capital and require maintaining reserves to protect creditors. However, the document argues that while important in the past, these stringent rules no longer meet the demands of modern Indian businesses that now need more flexibility to access capital.
The document summarizes the new Treasury regulations under Internal Revenue Code Section 385 regarding the treatment of debt versus equity in corporations. The regulations aim to provide objective tests to determine if an interest in a corporation should be treated as stock or indebtedness for tax purposes. While the regulations may eliminate controversy in some cases, they will also cause problems for small, closely held corporations. The document discusses some of the binding determinations in the regulations regarding debt instruments that are convertible into equity and loans guaranteed by shareholders.
Commercial & Complex Litigation Newsletter – Hot Topics That Impact Your Busi...CohenGrigsby
In this issue, Successor Liability for Environmental Liabilities by Julie W. Vanneman, PA Adopts the Revised Uniform Arbitration Act: What You Need to Know by Katie R. Jacobs, and The Key to Your CGL Policy: The Misunderstood Word: “Occurrence” by Mark A. May
This document provides a summary of a summative assignment on corporate social responsibility. It discusses how CSR can be defined as corporations having legal, ethical and philanthropic responsibilities beyond shareholder wealth maximization. It will examine minimum legal expectations of CSR in different jurisdictions like Australia and China. It argues that CSR is a voluntary moral expectation rather than a legal duty. This is illustrated by examining CSR practices of Australian mining companies and Apple. While these companies adopted many CSR policies and commitments, they failed to consistently implement them, especially when it came to issues like workers' rights and conditions. This shows that reputational risk was a main driver for CSR adoption, but other duties like profit-making could outweigh CSR in practice.
This study uses regression analysis to develop a model for predicting the likelihood of a large public company's survival through the bankruptcy process. It analyzes data on over 1,000 bankruptcies filed since 1979 to identify 11 variables that are statistically significant predictors of survival. These variables include the company's pre-bankruptcy financials, characteristics of the bankruptcy case like the appointment of creditors committees, and attributes of the presiding judge. The model enables calculation of each company's predicted survival probability at the time of its bankruptcy filing. The study aims to help parties make better decisions during cases and increase overall survival rates, particularly for riskier firms, by assigning cases to more experienced judges.
This chapter discusses the motivations for companies to engage in share buybacks. Some of the key reasons include: returning surplus cash to shareholders, increasing earnings per share, stabilizing the share price, using it as a defense against takeovers, facilitating shareholder exit, and signaling to the market that the shares are undervalued. However, buybacks could also be abused to manipulate the share price or entrench management against takeovers. The motivations discussed provide context for understanding the regulations surrounding share buybacks in subsequent chapters.
This document summarizes tools available in bankruptcy law that can help "old economy" businesses transition to the "new economy". It discusses how bankruptcy can provide a breathing spell through automatic stays on collections and the ability to reject unprofitable contracts. It also describes how selling assets or the entire business through Section 363 can allow restructuring. International bankruptcy jurisdiction and confirming a plan of reorganization to emerge from bankruptcy are also summarized as ways bankruptcy law can facilitate this economic transition.
Corporations obtain financial resources from two main sources: shareholders and debt holders. Shareholders are concerned with maximizing the firm's value and their return, while debt holders focus on the firm's ability to repay principal and interest. There are agency problems that arise between these groups due to the separation of ownership and control of corporations. Managers may make decisions that benefit themselves over shareholders. Debt holders also conflict with shareholders if risky projects are undertaken that could jeopardize the firm's solvency. Efficient solutions aim to align the interests of all parties.
Maintenance of capital vis a-vis creditors’ protection in a limited liability...preeteshraman
This document discusses the doctrine of maintenance of capital and creditors' protection in limited liability companies under Indian law. It provides an overview of the relevant provisions in the Indian Companies Act, 1956 and the proposed Companies Bill, 2011. Both laws place restrictions on reducing share capital and require maintaining reserves to protect creditors. However, the document argues that while important in the past, these stringent rules no longer meet the demands of modern Indian businesses that now need more flexibility to access capital.
Insolvent Trading Law Reform April 2010 Carl Guntherguntherc
This document summarizes and evaluates the proposals put forward by the Australian Government to reform insolvent trading provisions. It discusses three options for reform: maintaining the status quo, adopting a modified business judgment rule, or providing a temporary moratorium from insolvent trading laws to allow for informal restructuring. The author analyzes the arguments for and against each option. Ultimately, the author argues that a modified version of the second option (adopting a modified business judgment rule) would best support informal restructuring efforts while balancing the interests of all stakeholders.
Mergers Acquisitions and Other Restructuring Activities 9th Edition DePamphil...lujepyce
Full download : http://alibabadownload.com/product/mergers-acquisitions-and-other-restructuring-activities-9th-edition-depamphilis-solutions-manual/
Mergers Acquisitions and Other Restructuring Activities 9th Edition DePamphilis Solutions Manual
08 - Parella_Ready for Publication.docx (Do Not Delete) 1092.docxhoney725342
08 - Parella_Ready for Publication.docx (Do Not Delete) 10/9/2014 4:56 PM
OUTSOURCING CORPORATE ACCOUNTABILITY
Kishanthi Parella∗
Abstract: This Article addresses the problem of preventing human rights violations
abroad that result from the globalization of business. It specifically explores the challenge of
improving labor standards in global value chains. The modern business has changed
dramatically and has “gone global” in order to court foreign markets and secure resources,
including labor. Familiar household names, such as Nike and Apple, have “outsourced”
many of their functions to suppliers overseas. As multinational buyers, they dominate one
end of the global value chain. At the opposite end of the value chain are the local managers
and owners of the factories and workhouses where tablets are assembled, running shoes are
made, and gowns are sown. These facilities are often the sites of serious human rights
violations, such as forced labor and child labor.
Some actors have attempted to rein in transnational corporate misconduct through
litigation in domestic courts regarding the corporation’s actions abroad. However, after
Kiobel v. Royal Dutch Petroleum, it is unclear how successful such strategies will prove in
the future. This Article takes a different approach and focuses on preventing these human
rights violations by improving labor practices in global value chains. Unfortunately, current
approaches focus on encouraging better due diligence regarding the behavior of their
suppliers. These approaches rely on auditing, monitoring, and disclosures and have
dominated international (UN’s Protect, Respect, and Remedy Framework), national (Danish
Act on Financial Statement), and sub-state (California’s Transparency in Supply Chains Act
of 2010) efforts to combat human rights violations. However, this Article explains that these
and similar efforts will have limited effects because of the problem of misaligned incentives
between buyers and suppliers in global value chains. Suppliers have different business
profiles, interests, and constraints compared to their multinational buyers. Therefore,
conventional drivers for better labor practices that rely on reputational risks and consumer
boycotts will not work for suppliers. Instead, public actors and other stakeholders must
identify incentives that are appropriate for suppliers. Second, they must also adopt a reflexive
law governance approach in order to transmit these incentives effectively in global value
chains. This Article concludes by offering examples of strategies that public actors should
adopt in order to prevent another Foxconn or Rana Plaza tragedy.
∗ Assistant Professor, Washington & Lee University School of Law, J.D., LL.M. in International &
Comparative Law, Duke University School of Law; M.Phil. in International Relations, University of
Cambridge; B.A., University of Western Ontario. Earlier drafts benefited from comments at
workshops ...
Case Study On Mergers And AcquisitionsRikki Wright
The document provides an overview of a case study on mergers and acquisitions (M&A). It discusses different waves of M&A activity throughout history and different types of mergers such as horizontal, vertical, and conglomerate mergers. Factors influencing the success and failure of M&A deals in different waves are also examined.
Did ERISA's Prudent Man Rule Change the Pricing of Dividend Omitting Firms?stasia24
The document analyzes how the Employee Retirement Income Security Act of 1974 (ERISA) may have changed the pricing of firms that omitted dividends. It finds that:
1) ERISA subjected private pension fund managers to a strict "prudent man" rule and changed the legal landscape by disallowing contracts that exempted managers from their fiduciary duty of prudent investing.
2) Dividend-omitting firms underperformed substantially in the post-ERISA period of 1974-1988, but did not underperform in the pre-ERISA period of 1964-1973.
3) This suggests that ERISA's prudent man rule deterred pension funds from investing in dividend-omitting firms,
Wassim Zhani Chapter 6 Penalty Taxes on Corporate Accumulations.pdfWassim Zhani
The accumulated earnings tax is imposed on corporations that accumulate earnings to avoid tax on shareholders. Cotton, Inc. must show its failure to pay dividends is due to retaining funds for reasonable business needs. The corporation accumulated funds due to fear of losing the company, decreased profits from foreign competition, and modernization due to OSHA regulations. For the accumulation to be justified, Cotton must show these reasons meet the statutory reasonable needs test and that future needs are supported by specific, definite plans. Case law establishes that competition can justify accumulation if the corporation has plans for using funds, and closely held corporations need not have formal documentation but must provide evidence supporting intentions.
This document discusses international corporate governance, focusing on the UK's "comply or explain" system and comparing it to China's system. It notes that while the UK system provides flexibility, it has weaknesses like lack of compliance and unclear guidance on director duties. The "comply or explain" approach has received praise but questions remain about ensuring best practices are followed. China's system is also analyzed, looking at reforms and loopholes. Overall the document provides a critical analysis of both the UK and Chinese corporate governance systems.
The legal and institutional preconditions for strong securities markethuongntt16
This document discusses the legal and institutional prerequisites for strong securities markets. It argues that there are two essential requirements: 1) investors must receive good information about the value of a company's business, and 2) investors must have confidence that insiders like managers and controlling shareholders will not cheat them out of the value of their investment through self-dealing or theft. Strong securities markets depend on complex networks of laws and institutions that ensure these two conditions are met. The document examines which specific laws and institutions are most important for providing information to investors and protecting them from self-dealing.
This document argues that the existing statutory powers of strata entities are sufficient and do not require expansion. It outlines the main powers that strata entities have under New South Wales legislation to control and manage common property. These include powers related to owning common property, making by-laws, carrying out work, collecting fees, and taking legal action. It argues that conditioning some powers and requiring procedures like resolutions helps balance individual and group interests. Therefore, legislative reform is unnecessary as strata entities can address changing needs through by-law making powers.
Revitalizing Rule 14a-8's ordinary business exclusion for shareholder proposalsStephen Bainbridge
Who decides what products a company should sell, what prices it should charge, and so on? Is it the board of directors, the top management team, or the shareholders? In large corporations, of course, the answer is the top management team operating under the supervision of the board. As for the shareholders, they traditionally have had no role in these sort of operational decisions. In recent years, however, shareholders have increasingly used SEC Exchange Act Rule 14a-8 (the so-called shareholder proposal rule), to not just manage but even micromanage corporate decisions.
The rule permits a qualifying shareholder of a public corporation registered with the SEC to force the company to include a resolution and supporting statement in the company’s proxy materials for its annual meeting. In theory, Rule 14a-8 contains limits on shareholder micro-management. The rule permits management to exclude proposals on a number of both technical and substantive bases, of which the exclusion in Rule 14a-8(i)(7) of proposals relating to ordinary business operations is the most pertinent for present purposes. Rule 14a-8(i)(7) is intended to permit exclusion of a proposal that “seeks to ‘micro-manage’ the company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment.”
Unfortunately, court decisions have largely eviscerated the ordinary business operations exclusion. Corporate decisions involving “matters which have significant policy, economic or other implications inherent in them” may not be excluded as ordinary business matters, for example, which creates a gap through which countless proposals have made it onto corporate proxy statements.
ORC Chapter 1705 - Ohio's New Statute on Limited Liability CompaniesAndrew Wecker
This document summarizes an article about Ohio's new statute on limited liability companies (LLCs). It notes that LLCs combine the tax benefits of partnerships with the liability protections of corporations. However, it cautions that LLCs have drawbacks such as instability and difficulties with financing. It also notes that LLCs are new legal entities so there is little case law guidance. The document focuses on key issues for forming LLCs like securing partnership tax treatment and restrictions on transfers of membership interests. It advocates applying corporate veil piercing standards to LLCs going forward.
An ebook published by the law firm Porter Wright Morris & Arthur LLP. Contains several blog posts they've published on the topic of oil and gas lease issues for landowners. Our favorite article: My Sister is a Fractivist and Won’t Sign an Oil and Gas Lease. What Can We Do?
Insider Lease Agreements (Series: Fairness Issues in Real Estate-Based Bankru...Financial Poise
It is a common play in real estate to create a separate operating entity to serve as a tenant and execute a lease between the owner of the property and himself. Typically, this happens in assets which serve as a real estate-based business, such as a retail property. The structured enables the operator to reduce the taxable income of the business and also provide a liability shield for the property owner.
This arrangement can lead to some ethical issues, should the property owner become distressed. For example, is the lease amount above market and therefore being used to inflate the property valuation? Is rent actually being paid? Is there a proper lease in place or just an internal handshake? Attorneys need to understand the set-up in order to know what is in bounds and what is outside the lines.
To view the accompanying webinar, go to:https://www.financialpoise.com/financial-poise-webinars/insider-lease-agreements-2021/
Chapter4 International Finance ManagementPiyush Gaur
This document contains a chapter on corporate governance around the world with suggested answers to end-of-chapter questions. It discusses key topics like the strengths and weaknesses of public corporations, conditions that give rise to agency problems, objectives of corporate governance reform, and differences in legal protections between common and civil law traditions. The questions address issues such as stock options, foreign listings in the US, free cash flows, and the Parmalat corporate scandal in Italy.
The document discusses several court cases related to pre-sale dividends paid by subsidiaries to parent corporations prior to the sale of the subsidiary's stock. In the Waterman case, the court treated a pre-sale dividend as part of the sale proceeds rather than a true dividend. In the Litton case, the court found that the dividend was not tied to the sale and treated it as a true dividend. The IRS attempted to clarify its position in Revenue Ruling 75-493 by stating it would respect pre-sale dividends that were true distributions, not tied to the sale. Ultimately, whether a pre-sale distribution is treated as a dividend or sale proceeds depends on the specific facts of the case.
Some executives who accumulate a substantial ownership position in the company hedge or pledge their shares to limit their financial risk. Should the board of directors allow this to occur?
The article examines the Uniform Trade Secrets Act adopted by the Commissioners on Uniform State Laws in 1979. The Act aims to harmonize and clarify trade secret law, which had developed differently across states under common law. The summary discusses:
1) Trade secret law protects commercially valuable ideas and information from misappropriation through improper means such as theft, breach of confidentiality, or espionage.
2) Common law trade secret principles vary between jurisdictions, creating a need for uniform rules.
3) The Uniform Trade Secrets Act codifies trade secret definitions and available remedies, aiming to standardize an important area of commercial law across states.
Accounting For Goodwill On The Acquisition Of Corporate SubsidiariesAllison Koehn
This document discusses accounting for goodwill on the acquisition of corporate subsidiaries in Australia. It notes that while Australian accounting standards regulate goodwill accounting, firms retain discretion in determining the amount of goodwill recorded. The document aims to examine both ex ante and ex post factors that may influence goodwill accounting. Specifically, it seeks to analyze how the investment opportunities of the target and acquiring firms, as well as transaction-specific contractual arrangements, relate to the proportion of purchase price allocated to goodwill. Prior research on this topic from other countries is reviewed.
ENG315 Professional Scenarios
1. Saban is a top performing industrial equipment salesperson for D2D. After three years of working with his best client, he receives a text message from Pat (his direct manager) assigning him to a completely different account.
Pat has received complaints that Saban gets all of the good clients and is not a “team player.”
Saban responds to the message and asks for a meeting with Pat to discuss this change. Pat responds with another text message that reads: “Decision final. Everyone needs to get a chance to work with the best accounts so it is fair. Come by the office and pick up your new files.”
Moments later, Saban sends a text message to Karen, his regional manager and Pat’s boss. It simply reads, “We need to talk.”
2. Amber, Savannah, and Stephen work for Knowledge, Inc. (a consulting company). While on a conference call with Tim Rice Photography (an established client), the group discusses potential problems with a marketing campaign. Tim Rice, lead photographer and owner of Tim Rice Photography, is insistent the marketing is working and changes are not needed.
Amber reaches over to put Tim on “Mute” but accidently pushes a different button. She immediately says to Savannah and Stephen that the marketing campaign is not working and that “…Tim should stick to taking pretty pictures.”
Tim responds, “You know I can hear you, right?”
3. James shows up to work approximately five minutes late this morning, walks silently (but quickly) down the hallway and begins to punch in at the time clock located by the front desk.
Sarah, the front desk manager, says, "Good morning, James," but James ignores her, punches in, and heads into the shop to his workplace. Sarah rolls her eyes, picks up the phone, and dials the on-duty manager to alert her that James just arrived and should be reaching his desk any moment.
4. Paul works for the website division of SuperMega retail company. He receives an email late Friday afternoon that explains a new computer will launch at the end of next June and it will be in high demand with limited stock. Also contained in the three-page-message is that customers will be able to preorder the item 30 days before launch according to the production company. Paul is asked to create a landing page for consumers who are interested in learning more about the product.
By mistake, Paul sets up a preorder page for the product that afternoon (well in advance of the company authorized period) and late Friday evening consumers begin to preorder the product. Sharon, Vice President of Product Sales at SuperMega, learns of the error Saturday morning and calls Paul to arrange a meeting first thing Monday morning. Sharon explains to Paul on the phone that the company intends on canceling all of the preorders and Paul responds that the company should honor the preorders because it was not a consumer error. After a heated exchange, Paul hangs up on Sharon when she in.
ENG122 – Research Paper Peer Review InstructionsApply each of .docxchristinemaritza
ENG122 – Research Paper Peer Review Instructions
Apply each of the following questions to the paper you’ve selected to read. Provide thorough and thoughtful answers so the author can easily and appropriately revise.
Who is the main audience of this paper?
What is the main idea presented herein?
What information does the reader need to know about the idea for it to make sense?
Are examples clear and appropriate?
Is evidence or support for any claims provided?
Is the topic appropriate to the writing assignment? Does it need to be more general? More focused?
Are writer’s points organized in a logical way?
.
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OUTSOURCING CORPORATE ACCOUNTABILITY
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Abstract: This Article addresses the problem of preventing human rights violations
abroad that result from the globalization of business. It specifically explores the challenge of
improving labor standards in global value chains. The modern business has changed
dramatically and has “gone global” in order to court foreign markets and secure resources,
including labor. Familiar household names, such as Nike and Apple, have “outsourced”
many of their functions to suppliers overseas. As multinational buyers, they dominate one
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and owners of the factories and workhouses where tablets are assembled, running shoes are
made, and gowns are sown. These facilities are often the sites of serious human rights
violations, such as forced labor and child labor.
Some actors have attempted to rein in transnational corporate misconduct through
litigation in domestic courts regarding the corporation’s actions abroad. However, after
Kiobel v. Royal Dutch Petroleum, it is unclear how successful such strategies will prove in
the future. This Article takes a different approach and focuses on preventing these human
rights violations by improving labor practices in global value chains. Unfortunately, current
approaches focus on encouraging better due diligence regarding the behavior of their
suppliers. These approaches rely on auditing, monitoring, and disclosures and have
dominated international (UN’s Protect, Respect, and Remedy Framework), national (Danish
Act on Financial Statement), and sub-state (California’s Transparency in Supply Chains Act
of 2010) efforts to combat human rights violations. However, this Article explains that these
and similar efforts will have limited effects because of the problem of misaligned incentives
between buyers and suppliers in global value chains. Suppliers have different business
profiles, interests, and constraints compared to their multinational buyers. Therefore,
conventional drivers for better labor practices that rely on reputational risks and consumer
boycotts will not work for suppliers. Instead, public actors and other stakeholders must
identify incentives that are appropriate for suppliers. Second, they must also adopt a reflexive
law governance approach in order to transmit these incentives effectively in global value
chains. This Article concludes by offering examples of strategies that public actors should
adopt in order to prevent another Foxconn or Rana Plaza tragedy.
∗ Assistant Professor, Washington & Lee University School of Law, J.D., LL.M. in International &
Comparative Law, Duke University School of Law; M.Phil. in International Relations, University of
Cambridge; B.A., University of Western Ontario. Earlier drafts benefited from comments at
workshops ...
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The document provides an overview of a case study on mergers and acquisitions (M&A). It discusses different waves of M&A activity throughout history and different types of mergers such as horizontal, vertical, and conglomerate mergers. Factors influencing the success and failure of M&A deals in different waves are also examined.
Did ERISA's Prudent Man Rule Change the Pricing of Dividend Omitting Firms?stasia24
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1) ERISA subjected private pension fund managers to a strict "prudent man" rule and changed the legal landscape by disallowing contracts that exempted managers from their fiduciary duty of prudent investing.
2) Dividend-omitting firms underperformed substantially in the post-ERISA period of 1974-1988, but did not underperform in the pre-ERISA period of 1964-1973.
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This document discusses international corporate governance, focusing on the UK's "comply or explain" system and comparing it to China's system. It notes that while the UK system provides flexibility, it has weaknesses like lack of compliance and unclear guidance on director duties. The "comply or explain" approach has received praise but questions remain about ensuring best practices are followed. China's system is also analyzed, looking at reforms and loopholes. Overall the document provides a critical analysis of both the UK and Chinese corporate governance systems.
The legal and institutional preconditions for strong securities markethuongntt16
This document discusses the legal and institutional prerequisites for strong securities markets. It argues that there are two essential requirements: 1) investors must receive good information about the value of a company's business, and 2) investors must have confidence that insiders like managers and controlling shareholders will not cheat them out of the value of their investment through self-dealing or theft. Strong securities markets depend on complex networks of laws and institutions that ensure these two conditions are met. The document examines which specific laws and institutions are most important for providing information to investors and protecting them from self-dealing.
This document argues that the existing statutory powers of strata entities are sufficient and do not require expansion. It outlines the main powers that strata entities have under New South Wales legislation to control and manage common property. These include powers related to owning common property, making by-laws, carrying out work, collecting fees, and taking legal action. It argues that conditioning some powers and requiring procedures like resolutions helps balance individual and group interests. Therefore, legislative reform is unnecessary as strata entities can address changing needs through by-law making powers.
Revitalizing Rule 14a-8's ordinary business exclusion for shareholder proposalsStephen Bainbridge
Who decides what products a company should sell, what prices it should charge, and so on? Is it the board of directors, the top management team, or the shareholders? In large corporations, of course, the answer is the top management team operating under the supervision of the board. As for the shareholders, they traditionally have had no role in these sort of operational decisions. In recent years, however, shareholders have increasingly used SEC Exchange Act Rule 14a-8 (the so-called shareholder proposal rule), to not just manage but even micromanage corporate decisions.
The rule permits a qualifying shareholder of a public corporation registered with the SEC to force the company to include a resolution and supporting statement in the company’s proxy materials for its annual meeting. In theory, Rule 14a-8 contains limits on shareholder micro-management. The rule permits management to exclude proposals on a number of both technical and substantive bases, of which the exclusion in Rule 14a-8(i)(7) of proposals relating to ordinary business operations is the most pertinent for present purposes. Rule 14a-8(i)(7) is intended to permit exclusion of a proposal that “seeks to ‘micro-manage’ the company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment.”
Unfortunately, court decisions have largely eviscerated the ordinary business operations exclusion. Corporate decisions involving “matters which have significant policy, economic or other implications inherent in them” may not be excluded as ordinary business matters, for example, which creates a gap through which countless proposals have made it onto corporate proxy statements.
ORC Chapter 1705 - Ohio's New Statute on Limited Liability CompaniesAndrew Wecker
This document summarizes an article about Ohio's new statute on limited liability companies (LLCs). It notes that LLCs combine the tax benefits of partnerships with the liability protections of corporations. However, it cautions that LLCs have drawbacks such as instability and difficulties with financing. It also notes that LLCs are new legal entities so there is little case law guidance. The document focuses on key issues for forming LLCs like securing partnership tax treatment and restrictions on transfers of membership interests. It advocates applying corporate veil piercing standards to LLCs going forward.
An ebook published by the law firm Porter Wright Morris & Arthur LLP. Contains several blog posts they've published on the topic of oil and gas lease issues for landowners. Our favorite article: My Sister is a Fractivist and Won’t Sign an Oil and Gas Lease. What Can We Do?
Insider Lease Agreements (Series: Fairness Issues in Real Estate-Based Bankru...Financial Poise
It is a common play in real estate to create a separate operating entity to serve as a tenant and execute a lease between the owner of the property and himself. Typically, this happens in assets which serve as a real estate-based business, such as a retail property. The structured enables the operator to reduce the taxable income of the business and also provide a liability shield for the property owner.
This arrangement can lead to some ethical issues, should the property owner become distressed. For example, is the lease amount above market and therefore being used to inflate the property valuation? Is rent actually being paid? Is there a proper lease in place or just an internal handshake? Attorneys need to understand the set-up in order to know what is in bounds and what is outside the lines.
To view the accompanying webinar, go to:https://www.financialpoise.com/financial-poise-webinars/insider-lease-agreements-2021/
Chapter4 International Finance ManagementPiyush Gaur
This document contains a chapter on corporate governance around the world with suggested answers to end-of-chapter questions. It discusses key topics like the strengths and weaknesses of public corporations, conditions that give rise to agency problems, objectives of corporate governance reform, and differences in legal protections between common and civil law traditions. The questions address issues such as stock options, foreign listings in the US, free cash flows, and the Parmalat corporate scandal in Italy.
The document discusses several court cases related to pre-sale dividends paid by subsidiaries to parent corporations prior to the sale of the subsidiary's stock. In the Waterman case, the court treated a pre-sale dividend as part of the sale proceeds rather than a true dividend. In the Litton case, the court found that the dividend was not tied to the sale and treated it as a true dividend. The IRS attempted to clarify its position in Revenue Ruling 75-493 by stating it would respect pre-sale dividends that were true distributions, not tied to the sale. Ultimately, whether a pre-sale distribution is treated as a dividend or sale proceeds depends on the specific facts of the case.
Some executives who accumulate a substantial ownership position in the company hedge or pledge their shares to limit their financial risk. Should the board of directors allow this to occur?
The article examines the Uniform Trade Secrets Act adopted by the Commissioners on Uniform State Laws in 1979. The Act aims to harmonize and clarify trade secret law, which had developed differently across states under common law. The summary discusses:
1) Trade secret law protects commercially valuable ideas and information from misappropriation through improper means such as theft, breach of confidentiality, or espionage.
2) Common law trade secret principles vary between jurisdictions, creating a need for uniform rules.
3) The Uniform Trade Secrets Act codifies trade secret definitions and available remedies, aiming to standardize an important area of commercial law across states.
Accounting For Goodwill On The Acquisition Of Corporate SubsidiariesAllison Koehn
This document discusses accounting for goodwill on the acquisition of corporate subsidiaries in Australia. It notes that while Australian accounting standards regulate goodwill accounting, firms retain discretion in determining the amount of goodwill recorded. The document aims to examine both ex ante and ex post factors that may influence goodwill accounting. Specifically, it seeks to analyze how the investment opportunities of the target and acquiring firms, as well as transaction-specific contractual arrangements, relate to the proportion of purchase price allocated to goodwill. Prior research on this topic from other countries is reviewed.
Similar to Chicago-Kent Law ReviewVolume 65Issue 3 Symposium on the S.docx (20)
ENG315 Professional Scenarios
1. Saban is a top performing industrial equipment salesperson for D2D. After three years of working with his best client, he receives a text message from Pat (his direct manager) assigning him to a completely different account.
Pat has received complaints that Saban gets all of the good clients and is not a “team player.”
Saban responds to the message and asks for a meeting with Pat to discuss this change. Pat responds with another text message that reads: “Decision final. Everyone needs to get a chance to work with the best accounts so it is fair. Come by the office and pick up your new files.”
Moments later, Saban sends a text message to Karen, his regional manager and Pat’s boss. It simply reads, “We need to talk.”
2. Amber, Savannah, and Stephen work for Knowledge, Inc. (a consulting company). While on a conference call with Tim Rice Photography (an established client), the group discusses potential problems with a marketing campaign. Tim Rice, lead photographer and owner of Tim Rice Photography, is insistent the marketing is working and changes are not needed.
Amber reaches over to put Tim on “Mute” but accidently pushes a different button. She immediately says to Savannah and Stephen that the marketing campaign is not working and that “…Tim should stick to taking pretty pictures.”
Tim responds, “You know I can hear you, right?”
3. James shows up to work approximately five minutes late this morning, walks silently (but quickly) down the hallway and begins to punch in at the time clock located by the front desk.
Sarah, the front desk manager, says, "Good morning, James," but James ignores her, punches in, and heads into the shop to his workplace. Sarah rolls her eyes, picks up the phone, and dials the on-duty manager to alert her that James just arrived and should be reaching his desk any moment.
4. Paul works for the website division of SuperMega retail company. He receives an email late Friday afternoon that explains a new computer will launch at the end of next June and it will be in high demand with limited stock. Also contained in the three-page-message is that customers will be able to preorder the item 30 days before launch according to the production company. Paul is asked to create a landing page for consumers who are interested in learning more about the product.
By mistake, Paul sets up a preorder page for the product that afternoon (well in advance of the company authorized period) and late Friday evening consumers begin to preorder the product. Sharon, Vice President of Product Sales at SuperMega, learns of the error Saturday morning and calls Paul to arrange a meeting first thing Monday morning. Sharon explains to Paul on the phone that the company intends on canceling all of the preorders and Paul responds that the company should honor the preorders because it was not a consumer error. After a heated exchange, Paul hangs up on Sharon when she in.
ENG122 – Research Paper Peer Review InstructionsApply each of .docxchristinemaritza
ENG122 – Research Paper Peer Review Instructions
Apply each of the following questions to the paper you’ve selected to read. Provide thorough and thoughtful answers so the author can easily and appropriately revise.
Who is the main audience of this paper?
What is the main idea presented herein?
What information does the reader need to know about the idea for it to make sense?
Are examples clear and appropriate?
Is evidence or support for any claims provided?
Is the topic appropriate to the writing assignment? Does it need to be more general? More focused?
Are writer’s points organized in a logical way?
.
ENG122 – Research Paper Peer Review InstructionsApply each of th.docxchristinemaritza
ENG122 – Research Paper Peer Review Instructions
Apply each of the following questions to the paper you’ve selected to read. Provide thorough and thoughtful answers so the author can easily and appropriately revise.
Who is the main audience of this paper?
What is the main idea presented herein?
What information does the reader need to know about the idea for it to make sense?
Are examples clear and appropriate?
Is evidence or support for any claims provided?
Is the topic appropriate to the writing assignment? Does it need to be more general? More focused?
Are writer’s points organized in a logical way?
.
This document provides instructions for Assignment 2.1: Stance Essay Draft in an ENG 115 course. Students are asked to write a 3-4 page stance essay arguing a position on a topic and supporting it with evidence from the required WebText sources. The document outlines the requirements for the essay, including using third person point of view and a formal tone, writing an introduction with a clear thesis statement, including supporting paragraphs for each thesis point, using effective transitions and logical organization, and concluding in a way that leaves a lasting impression. Students are evaluated based on meeting criteria in these areas as well as applying proper grammar, mechanics, punctuation, and formatting according to SWS guidelines.
ENG 510 Final Project Milestone Three Guidelines and Rubric .docxchristinemaritza
This document provides guidelines and a rubric for Milestone Three of the ENG 510 Final Project. In this milestone, students are asked to analyze both a classic and contemporary text in terms of narrative structure, character development, literary conventions, and themes. Specifically, students must analyze each text's use of conflict, crisis, resolution, and character development, relate the author's choices to literary conventions of the time period, and evaluate how each text uses these elements to create its intended theme. The submission should be 3-4 pages following specific formatting guidelines and address all critical elements outlined in the rubric.
ENG-105 Peer Review Worksheet Rhetorical Analysis of a Public.docxchristinemaritza
ENG-105 Peer Review Worksheet: Rhetorical Analysis of a Public Document
Part of your responsibility as a student in this course is to provide quality feedback to your peers that will help them to improve their writing skills. This worksheet will assist you in providing that feedback. To highlight the text and type over the information in the boxes on this worksheet, double-click on the first word.
Name of the draft’s author: Type Author Name Here
Name of the peer reviewer: Type Reviewer Name Here
Reviewer
After reading through the draft one time, write a summary (3-5 sentences) of the paper that includes your assessment of how well the essay meets the assignment requirements as specified in the syllabus and the rubric.
Type 3-5 Sentence Summary Here
After a second, closer reading of the draft, answer each of the following questions. Positive answers will give you specific elements of the draft to praise; negative answers will indicate areas in need of improvement and revision. Please be sure to indicate at least three positive aspects of the draft and at least three areas for improvement in reply to the questions at the bottom of this worksheet.
Rhetorical Analysis Content and Ideas
· How effectively does the thesis statement identify the main points that the writer would like to make about the public document he or she is analyzing?
Type Answer Here
· How successful is the writer’s summary of the public document under study?
Type Answer Here
· How effective is the writer’s explanation and evaluation of the rhetorical situation, genre, and stance?
Type Answer Here
· How persuasively is evidence used to support assertions and enrich the essay?
Type Answer Here
· How effectively does the essay’s content support the thesis by analyzing the document and evaluating its effectiveness according to strategies from chapter 8 of Writing with Purpose?
Type Answer Here
Organization
· How effectively does the introduction engage the reader while providing an overview of the paper?
Type Answer Here
· Please identify the writer’s thesis and quote it in the box below.
Type Writer's Thesis Here
· How effectively do the paragraphs develop the topic sentence and advance the essay’s ideas?
Type Answer Here
· How effectively does the conclusion provide a strong, satisfying ending, not a mere summary of the essay?
Type Answer Here
Format
· How closely does the paper follow GCU formatting style? Is it double-spaced in 12 pt. Times New Roman font? Does it have 1" margins? Does it use headers (page numbers using appropriate header function)? Does it have a proper heading (with student’s name, date, course, and instructor’s name)?
|_|Yes |_|No Add optional clarification here
· Are all information, quotations, and borrowed ideas cited in parenthetical GCU format?
|_|Yes |_|No Add optional clarification here
· Are all sources listed on the references page in GCU format?
|_|Yes |_|No Add optional clarification here
· Is the required minimum number of sources li.
ENG 272-0Objective The purpose of this essay is t.docxchristinemaritza
ENG 272-0
Objective: The purpose of this essay is to make an analytical argument about connections across texts, time periods and cultures, and to situate this argument within the context of the existing critical discourse. You will need to select 3 primary texts to actively analyze in order to develop an argument of your own; you should make an argument about, not simply summarize, the primary texts.For the primary texts, choose one (1) work from each of the three (3) columns below.
Prompt:Based on Harper Lee's Pulitzer Prize winning book of 1961, To Kill A Mockingbird is set in small-town Alabama, 1932. Atticus Finch (played by Gregory Peck) is a lawyer and a widower with two young children, Jem and Scout. Atticus Finch is currently defending Tom Robinson, a black man accused of raping a white woman. Meanwhile, Jem and Scout are intrigued by their neighbors, the Radley’s, and the mysterious, seldom-seen Boo Radley in particular. The story features a number of “mockingbirds”—those who are scorned by society unfairly, and makes timeless insights about the nature of humanity and what it means to be human.
Option 1:Reflect on the film’s assertions, and then construct a thesis and write an essay that directly cites from a minimum of three (3) different texts considered in in this class, a minimum of one from each of the three columns below.
Option 2:With Lee’s story in mind, discuss and reflect on the following questions. What are the basic rights and liberties of a human in a social democracy? What effect does dehumanization have on the victim and the perpetrator? What is society’s role in facilitating the happiness and prosperity of its members? What role does conformity and blind adherence to tradition play in perpetuating inequality? Your response should directly cite from a minimum of three (3) different texts considered in ENG 272, a minimum of one from each of the three columns below.
· The essay must be 4-6 pages (1000-1500 words), typed, double-spaced in Times New Roman 12 pt. font with 1-inch margins. Include your name, the course #, the date, and an original title on the first page (standard MLA format). You are to use no sources other than the assigned texts from the table below; therefore, a Works Cited page is not necessary!!!!
The Enlightenment
Revolutions
Modernity
Kant-“What is Enlightenment?”
Descartes-“Discourse on Method”
Diderot-Encyclopedie
Wollstonecraft—“A Vindication of the Rights of Woman”
Paine-“Common Sense”
Paine-“Age of Reason”
Jefferson: Declaration of Independence
Jefferson: “On Equality”
Declaration of Sentiments
Declaration of Rights
DeGouges: The Rights of Woman
Douglass: The Narrative of the Life of Frederick Douglass
Kafka: Metamorphosis
Whitman: “Song of Myself”
Selected Dickenson poems
Wordsworth: “The World is Too Much with Us.”
Assignment: How does the Critical Race Theory apply to the study of dismattling the
school to prison pipeline.
1. 6-7 pages
.
ENG 360 01 American PoetrySpring 2019TuesdayFriday 800 –.docxchristinemaritza
ENG 360 01 American Poetry
Spring 2019
Tuesday/Friday 8:00 – 9:15 St. Mary’s B1
Brandon Clay
Course Description:
ENG 360 is a survey of a selection of American poetry and poetics from the Puritan era to the present, showing the effects of the Romantic revolution on an American Puritan tradition and the making of a national vernacular for poetry. Students will study poetic technique and read authors such as Bradstreet, Taylor, Freneau, Emerson, Longfellow, Poe, Thoreau, Whitman, Dickinson, Robinson, Dunbar, Crane, Stein, Sandburg, Stevens, Williams, Pound, H.D., Moore, Eliot, Millay, Hughes, Cullen, Zukofsky, Auden, Roethke, Bishop, Berryman, Brooks, Lowell, Plath, Glück, Levertov, Ginsberg, Merrill, Kinnell, Rich, Pinsky, and Collins. This is a writing intensive course and it meets literature requirements for graduation.
Course Learning Outcomes:
· To become familiar with the history of and different styles of American poetry
· To develop an understanding of the historical and social frameworks in which poems are written
· To understand different critical approaches to the interpretation of poetry
· To refine the critical and analytical skills used in verbal and written discussions of poetry
· To develop an enjoyment of and appreciation for poetry
Prerequisite:
ENG 142, earning a “C” or better.
Required Text(s):
Lehman, David, ed. The Oxford Book of American Poetry. Oxford: Oxford UP, 2006.
Expected Student Behavior in Class:
All students are expected to behave in a professional and courteous manner to both the professor and other students in class, and to follow the procedures as outlined in this syllabus for this course. If the professor deems that a student has failed to adhere to this standard, the professor shall make a report to both the Dean of the School of Arts & Sciences, and the Dean of Students. Please follow all policies as written in the 2018-2019 Student Handbook.
Preparation and Active Class Participation:
Students are required to read all works for the course. Assignments must be read prior to the class in which the particular work(s) will be discussed. Papers must be written in MLA format, using and citing quotations from primary and/or secondary sources. Written work is due at the beginning of class on the due date specified on the schedule below. Major writing assignments will be submitted electronically using Moodle and Turnitin.com. Some written work may also be turned in as a hard copy. Use white paper and 12 point, Times New Roman font with one-inch margins. All papers must be stapled and (per MLA format) include name, class title, instructor name, and due date in upper left hand corner.
Note that Student Performance counts for 15% of the final grade (complete grading system described below). This is defined as how a student conducts him/herself in the class, and refers specifically to attendance, lateness, manners, and respect towards professor and fellow students. A student can expect to receive a.
ENG 4034AHamlet Final AssessmentDUE DATE WEDNESDAY, 1220, 1.docxchristinemaritza
ENG 403/4A
Hamlet Final Assessment
DUE DATE: WEDNESDAY, 12/20, 11:30 PM
At the end of the Hamlet unit, you will have two choices to earn 100 points. These choices replace the final essay test that was in the course originally. You can choose only ONE of the following options, and the due date remains the same. These activities will be graded just like the test would have been, meaning there is no chance to redo or revise the assignment. However, this will be taken into consideration when I grade them.
No matter what option you choose, it must be completed in a Word document and labeled or titled so that it is clear to your teacher which option you chose. On your document, write it as a heading, like this:
Your first and last name
Date
Name of the option you chose
Models of each assignment can be found in class announcements.
Option #1: RAFT
A RAFT is a writing assignment that encourages you to uncover your own voice and formats for presenting your ideas about the content you are studying. In this design, you have a lot of freedom to choose what interests you.
· R = Role of the writer: Who are you as the writer?
· A = Audience: To whom are you writing?
· F = Format: In what format are you writing?
· T = Topic: What are you writing about?
The process:
1. Use the chart below to choose two characters from the ROLE column. Your goal is to write in the voice (Role) of YOUR CHARACTER.
2. Using the knowledge and understanding that you have gained throughout the reading and viewing of Hamlet, choose a related Audience, Format, and Topic from the chart below.
3. As you craft your creative writing assignment, be sure the character’s personality and motivations are evident. For instance, you could choose Ophelia (role), Hamlet (audience), blog entry (format) and betrayal (theme). Then you will write a blog entry from Ophelia’s point of view with Hamlet as the intended audience focused on the theme of betrayal.
4. Next, repeat this process for a different role, audience, format and theme.
5. Please see the model below (pg. 8) to understand what to do.
6. If you are unsure of what a particular format is, the best thing to do is look up examples online.
· YOU MUST CHOOSE TWO CHARACTERS FROM THE ROLE LIST AND COMPLETE TWO DIFFERENT RAFTS. THEY WILL BE WORTH 50 POINTS EACH AND MUST BE AT LEAST 200 WORDS EACH.
· To clarify, this means two different roles, two different audiences, two different formats and two different themes.
· You may use some words from the play, but if you do they MUST be exact and put in quotation marks. The goal, however, is to use your own words. No outside sources are to be used for this assignment.
· You can choose to write about a particular scene or event, or the play as a whole.
· You are in the voice of the character, so if you choose the role of Ophelia, then you will become her (first person POV) and reflect her personality and motivations in your writing.
Role
Audience
Format
Theme
Choose the role that you .
ENG 3107 Writing for the Professions—Business & Social Scienc.docxchristinemaritza
ENG 3107: Writing for the Professions—Business & Social Sciences
Rev.6.26.18
Project 2: Memorandum
Your Strategies for Recommendation Report
OWL Draft Due Date:
Final Draft Setup Requirement:
• Polished, properly formatted, 2-page memorandum, that begins with a standard
memo heading section that contains To, From, Subject, and Date
• 12-point Times New Roman font
• Single-spaced lines
• 1st or 3rd person point of view
WHAT: Write a 2-page memorandum (memo) addressed to your course instructor as its
intended audience. The goal of your memo is to persuade your instructor to approve your
strategies for constructing your Recommendation Report, where you will identify a problem
within a specific company or organization and persuade a specific audience to take action.
You must use the Rhetorical Structure outlined in the HOW section below.
NOTE: Rather than draft a shorter version of your Recommendation Report, describe what you
intend to do to create your Recommendation Report as written below.
HOW: BRAINSTORM: Here are some suggestions from Contemporary Business Communications
(Houghton Mifflin, 2009) to prompt your thinking about possible topics for the
Recommendation Report as you develop this memo assignment (the term "ABC company" is a
generic name and cannot be used for the assignment):
• comparison of home pages on the Internet for ABC industry
• dress policy for the ABC company
• buying versus leasing computers at ABC company or university
• developing a diversity training program at ABC company
• encouraging the use of mass transit at ABC company or university
• establishing a recycling policy at ABC company
• evaluating a charity for corporate giving at ABC company
• recommending a site for the annual convention of ABC association
• starting an employee newsletter at ABC company
• starting an onsite wellness program at ABC company or university
• best online source for office supplies at ABC company
• best shipping service (e.g. UPS, USPS, FedEx)
• most appropriate laptop computer for ABC company managers who travel
ENG 3107: Writing for the Professions—Business & Social Sciences
Rev.6.26.18
RHETORICAL STRUCTURE: Use the subheadings in bold below in your memo.
• Description: What problem or challenge will you address in your Recommendation
Report? Provide an overview in two or three sentences, explaining why the memo has
been written. Why is the problem/challenge important to address?
• Objective: What should your audience know and do/change as a result of your
Recommendation Report?
• Information: What evidence will you will need to gather to support your
recommendations in the Recommendation Report? Where do you think you will find
this information? How will this information help you persuade your reader of your
recommendation? (Do not conduct any research for this memo assignment, just
describe your research plans.)
• Audience: Who is .
ENG 271Plato and Aristotlea Classical Greek philosophe.docxchristinemaritza
Plato and Aristotle were two of the most influential philosophers of Classical Greece. Plato was a student of Socrates and founded the Academy in Athens, considered the first institution of higher learning. He is known for his dialogues that explored philosophical problems through questioning. Aristotle was a student of Plato and later taught Alexander the Great. He wrote on many topics including poetry, theater, and politics. Both made major contributions to Western philosophy and how we understand concepts like knowledge, justice, and the ideal state.
ENG 315 Professional Communication Week 4 Discussion Deliver.docxchristinemaritza
ENG 315: Professional Communication
Week 4 Discussion: Delivering Bad News Messages
Delivering Bad News Messages
In the Chapter 7 reading, you learned about inductive and deductive methods of reasoning and communication. Share an example of a "bad news message" either from the text or from an online article you've seen (provide a link, please, if you choose the latter option). Explain whether you believe inductive OR deductive reasoning would be more effective to share that bad news with others and why.
After you have responded to this starter thread, don't forget to reply to at least one classmate to meet the minimum posting frequency requirement.
Student Response:
Erica Collins
RE: Week 4 Discussion: Delivering Bad News Messages
"They never gave me a fair chance," That's unfair," "This just can't be." In this case I will have to go with inductive reasoning after reviewing in some ways they are so similar to one another. Inductive reasoning is more based on uncertainty and deductive reasoning is more factual. In this case the conversation is more of an assumption.
I would think deductive would be more effective to share because deductive focus more on facts. Deductive Reasoning is the basic form of valid reasoning in my words accurate information that can be proven. Inductive reasoning is the premises in which the premises are viewed as supplying some evidence for truth. In my words this seems more of an opinion until proven. Tom me they are similar you have to really read to understand the difference of inductive and deductive reasoning.
ENG 315: Professional Communication
Due Week 4 and worth 150 points
Choose one of the professional scenarios provided in Blackboard under the Course Info tab, (see next page) or click here to view them in a new window.
Write a Block Business Letter from the perspective of company management. It must provide bad news to the recipient and follow the guidelines outlined in Chapter 7: Delivering Bad-News Messages in BCOM9 (pages 116-136).
The message should take the block business letter form from the posted example; however, you will submit your assignment to the online course shell.
The block business letter must adhere to the following requirements:
Content:
Address the communication issue from the scenario.
Provide bad news from the company to the recipient.
Concentrate on the facts of the situation and use either the inductive or deductive approach.
Assume your recipient has previously requested a review of the situation via email, letter, or personal meeting with management.
Format:
Include the proper introductory elements (sender’s address, date, recipient’s address). You may create any details necessary in the introductory elements to complete the assignment.
Provide an appropriate and professional greeting / salutation.
Single space paragraphs and double space between paragraphs.
Limit the letter to one page in length.
Clarity / Mechanics:
Focus on clarity, writing mechanics, .
ENG 315 Professional Communication Week 9Professional Exp.docxchristinemaritza
ENG 315: Professional Communication
Week 9
Professional Experience #5
Due at the end of Week 9 and worth 22 points
(Not eligible for late policy unless an approved, documented exception provided)
For Professional Experience #5, you will develop a promotional message. This can be an email, letter, info graphic, image, or any other relevant material that answers the following question:
Why should students take a Professional Communications course?
Instructions:
Step One: Choose the type of file you want to use to develop your promotional message (Word document, PowerPoint, etc.) and open a new file in that type and save to your desktop, using the following file name format:
Your_Name_Wk9_Promotion
Example: Ed_Buchanan_Wk9_Promotion
Step Two: Develop a promotional message that is no more than one page to explain why students should take a professional communications course.
Step Three: Submit your completed promotional message file for your instructor’s review using the Professional Experience #5 assignment link the Week 9 in Blackboard. Check that you have saved all changes and that your file name is follows this naming convention: Your_Name_Wk9_Promotion.
In order to receive credit for completing this task, you must:
Ensure your message is no more than one page.
Provide an effective answer to the question of why students should take a professional communication’s class.
Submit the file to Blackboard using the Professional Experience #5 link in the week 9 tab in Blackboard.
Note: This is a pass/fail assignment. All elements must be completed simulating the workplace environment where incomplete work is not accepted.
The professional experience assignments are designed to help prepare you for that environment. To earn credit, make sure you complete all elements and follow the instructions exactly as written. This is a pass/fail assignment, so no partial credit is possible. Assignments that follow directions as written will receive full credit, 22 points. Assignments that are incomplete or do not follow directions will be scored at a zero.
The specific course learning outcomes associated with this assignment are:
Plan, create, and evaluate professional documents.
Write clearly, coherently, and persuasively using proper grammar, mechanics, and formatting appropriate to the situation.
Deliver professional information to various audiences using appropriate tone, style, and format.
Learn communication fundamentals and execute various professional tasks in a collaborative manner.
Analyze professional communication examples to assist in revision.
ENG 315: Professional Communication
Week 9 Discussion: Professional Networking
Part 1:
Professional Networking
Select ONE of the following:
Discuss three (3) reasons for utilizing professional networking during the job-hunting process. Note: Some potential points to consider include: developing a professional network, experiences you had presenting your resume at a job fair, or inter.
ENG 202 Questions about Point of View in Ursula K. Le Guin’s .docxchristinemaritza
ENG 202: Questions about Point of View in Ursula K. Le Guin’s “The Wife’s Story” (284-287), Alice
Walker’s “Olive Oil” and Meron Hadero’s “The Suitcase” (both in folder) 7 questions: 50 points total
Read everything carefully. This is designed to provide a learning experience.
Writers often use one of these three types of narration:
First-person narration uses “I” because “one character is telling the story from [his/her] point
of view.” In other words, we step into the skin of this character and move through the story
seeing everything through his/her eyes alone. To best illustrate first-person narration, choose
parts of the story that show the character revealing intimate thoughts/feelings, something we
can see only by having access to his/her heart & mind. This is a useful point of view to show a
character’s change of heart, to trick a reader, and/or to make the reader realize that s/he
understands more than the narrator does.
Third-person omniscient narration: “The narrator sees into the minds of any or all of
the characters, moving when necessary from one to another.” In other words, the
narrator is god-like (all-knowing) with the ability to report on the thoughts of multiple
characters. To best illustrate omniscient third-person narration, choose parts of the
story that show characters’ private thoughts/feelings revealed only to us, not the
others. This can be a very satisfying point of view because we know what is on many or
all characters' minds and do not have to guess. This is a useful point of view to show
how events impact characters in the story.
Third-person limited narration “reduces the narrator’s scope to a single
character.” In other words, the narrator does not know all but is rather
limited to the inner thoughts of one character; however, this narrator can
also objectively report on the environment surrounding this character. To
best illustrate third-person limited, choose parts of the story that
illustrate this character’s thoughts/feelings that are only revealed to
us, not to the others; additionally, choose parts of the story that show
objective reporting of events. This is a useful point of view for stories
that highlight a dynamic between a character and the world.
Each story this week uses a different type of narration.
“The Wife’s Story” uses first-person narration: the story is told from the point of view of the
wife.
1) Quote a part of the story that proves it is written in first-person narration. To earn
full points, choose wisely. To best illustrate first-person narration, choose a part of
the story that shows the wife revealing an intimate thought/feeling, something we can
see only by having access to her heart/mind. To earn full points, achieve correct
integration, punctuation, and citation by using the format below. (8 points)
Highlighting is just for lesson clarity.
Quotation Format
The wife reveals, “Quotation” (#)..
ENG 220250 Lab Report Requirements Version 0.8 -- 0813201.docxchristinemaritza
ENG 220/250 Lab Report Requirements
Version 0.8 -- 08/13/2018
I. General Requirements
The length of a lab report must not exceed 10 typewritten pages. This
includes any and all attachments included in the report.
The font size used in the body of the report must not exceed 12 pts.
The lab report must be submitted as a single document file with all of
the required attachments included.
[Refer to Exhibit #1]
Reports submitted electronically must be in the Adobe PDF format.
For any videos submitted (online students only):
They must have a minimum video resolution of 480p.
The maximum length for any video submitted must not exceed 5
minutes.
Due to their large file size, the video files must not be sent as
email attachments.
They can be uploaded to cloud storage (Dropbox, Google Drive, One
Drive, etc.). The link to the video file can then be submitted
via email.
II. Required Attachments
MultiSim simulation screenshots
The only simulation software that can be used for any lab
assignments in this course is MultiSim.
[Refer to Exhibit #2]
The simulation(s) shown on the lab report must show the same
types of measuring instruments that were used to perform the lab.
[Refer to Exhibit #3]
The illustration(s) included in the lab report must be actual
screenshots of the circuit simulation.
[Refer to Exhibit #4]
All screenshots of circuit simulations included in the report
must show the values being measured.
[Refer to Exhibit #5]
The screenshot(s) must be included in the body of the report.
They must be properly labelled and referenced in the lab report.
Printouts from MultiSim are not acceptable.
[Refer to Exhibit #6]
Raw Data
A copy of the original hand-written data sheet that you used to
record the data must be included in the lab report.
[Refer to Exhibit #7]
If the data is recorded on the lab assignment sheet, include only
the portion of the assignment sheet that you wrote your data on.
[Refer to Exhibit #8]
III. Lab Report Requirements
Equipment Documentation
The lab reports must include the make, model, and serial number
of lab equipment used in performing the lab. The equipment
includes
● Multimeters
● Capacitance and inductance testers
● Oscilloscopes
● Function generators
● Power Supplies
[Refer to Exhibit #9]
Lab Procedure
The lab procedure that you used must be documented in the report
as a step-by-step process. Bullet points or numbers must be used
to identify each step.
[Refer to Exhibit #10]
Data
Data must be shown in tabular format and all headings must be
clearly labelled along with the proper units of measurement.
[Refer to Exhibit #11]
No more than 2 to 4 decimal places are required for the showing
of data values. The use of engineering notation and/or metric
units of measurement is strongly recommended.
[Refer to Exhibit #12]
Showing ca.
ENG 203 Short Article Response 2 Sample Answer (Worth 13 mark.docxchristinemaritza
ENG 203: Short Article Response 2
Sample Answer
(Worth 13 marks)
ENGL 203 -Response Assignment 2: Sample Answer
1
Writing a Short Article Response (3 paragraph format + concluding sentence)
Paragraph 1:
Introduction
Introduction (summary) paragraph
· include APA citation of title, author, date + main idea of the whole article
· Brief summary of article (2 to 3 sentences)
· Last sentence is the thesis statement –
o must include your opinion/position + any two focus points from the article you have chosen to respond to
Paragraph 2:
Response Paragraph 1
Response to your first focus point from article #1
Paragraph 3:
Response Paragraph 2
Response to 2nd focus point from the article # 2
Paragraph 4: (optional)
Conclusion
Restate your thesis in slightly different words with concluding thoughts/summary of your responses
Length
300 to 400 words
*No Quotations, please paraphrase all sentences
A Response to “Access to Higher Education”
First sentence: APA Citation + reporting verb + main idea of whole article
In the article “Access to Higher Education,” Moola (2015) discussed the possible factors affecting one’s choice in attending higher education. Many people believe that the dramatic rise in college tuition is the main cause of inaccessibility to college. However, parental education backgrounds and their influence on children, admission selectivity categories in universities, unawareness of student aid opportunities, and coping with personal and social challenges are all having effects on a person’s option regarding their enrollment in colleges. Several negative consequences may occur if tertiary education is considered as a right such as negligence of studies and decrement in pass rate. While it is true that higher educational institutes admit students based on certain criteria, one could argue that it is unfair that universities prefer the wealthy, and those who are academically excellent.
Summary sentences (2 to 3)
Student Thesis: 2 focus points + opinion/position phrases (one positive, one negative)
Firstly, this article overlooked the fact that financial aid is not available for everyone and student loans have to be paid back. The author suggested that if university fees are not affordable, students can apply for academic grants and loans. However, scholarships and academic awards are distributed on a highly competitive basis, and therefore, only students who meet the eligibility requirements can benefit from them. Student financial aid does not cover all fees as well, and students awarded grants have to find other sources of financial aid to cover university fees and living costs. Many universities have a limited number or do not offer merit-scholarships at all, making it difficult for low-income students to be enrolled in their institution. Moreover, student loans usually carry interests that will keep increasing until repaid, resulting in large numbers of fresh graduates getting into debts.
Topic sentence: 1st focu.
ENG 130 Literature and Comp ENG 130 Argumentative Resear.docxchristinemaritza
This document provides guidance for an argumentative research essay assignment on August Wilson's play Fences. Students must choose one of four conflicts - Troy vs Society, Troy vs Himself, Troy vs Family, or Troy vs Death - and argue that it is the main driver of the other elements in the story. The document outlines the requirements, including a 3-4 page essay in APA format with an introduction, thesis, evidence from the play and outside sources, and integration of course concepts. It also provides a rubric for grading and notes on developing an argument, incorporating research, and using proper in-text citations.
ENG 132What’s Wrong With HoldenHere’s What You Should Do, .docxchristinemaritza
ENG 132
What’s Wrong With Holden?/Here’s What You Should Do, Holden…
Spring 2019
Your next project will involve gathering, recording, and analyzing information about
The Catcher in the Rye
.
The goal is to provide the reader with a better understanding of the novel’s main character, Holden Caulfield.
Think about his behavior in terms of cause and effect.
Your essay should focus either on reasons for his behavior (What’s Wrong With Holden?), or the results of Holden’s choices (Here’s What You Should Do, Holden…).
If you choose the latter, include a section that presents advice/guidance (kind of like Old Spencer).
Make sure to use research to support your ideas!
Here are the requirements:
1. 3-4 sources (books, articles, interviews, media, etc.)
2. A 2-page summary of the novel
3. A short essay (2-3 pages) that incorporates the information you gathered and supports some type of causal argument.
4. An MLA “Works Cited” in the essay (it doesn’t count as a page).
.
ENG 130- Literature and Comp Literary Response for Setting.docxchristinemaritza
ENG 130- Literature and Comp
Literary Response for Setting as a Device
Essay ENG 130: Literary Response for Setting
Sources: Choose one of the stories that you read in Unit 2/Setting Unit
“To Build a Fire” by Jack London
“The Storm” by Kate Chopin
“This is What It Means to Say Phoenix, Arizona” by Alexie
“The Cask of Amontillado” by Edgar Allan Poe
Prompt (What are you writing about?):
How does Setting affect/contribute to the plot of your chosen story?
Note: Remember that Setting is not only the place in which a story occurs. It is also mood,
weather, time, and atmosphere. These things drive other parts of the story.
How to get started:
Choose a story from this unit and discern all the elements of the Setting.
Decide in what three ways the setting contributes to the plot of your chosen story.
Formulate a thesis about setting and these three areas.
Mini lesson on thesis statements:
If you were writing about Star Wars, a sample thesis might read:
The setting in the Star Wars movies contributes to the desperateness of the
Resistance forces, provides a vast space for action and conflicts to occur,
focuses on how advances will affect society.
Broken down, this thesis would read:
The Setting in the Star Wars movies:
a. contributes to the desperateness of the Resistance forces (write
a supporting section with text examples)
b. provides a vast space for action and conflicts to occur, focuses
on how advances will affect society (write a supporting section
with text examples)
c. focuses on how advances will affect society (write a supporting
section with text examples)
Ask yourself, what is the setting of my story and how does it affect the plot
in the story?
For example, it is apparent that in London’s “To Build a Fire,” you would
devote a supporting section to how the weather conditions drive both the
conflict and the character’s actions.
After you have made connections to the three areas that setting affects, then
form your thesis. Here is a template for your thesis:
The Setting in author’s name and title of the story, contributes to first way
in which the setting affects the story, second way in which setting affects
the story, third way in which setting affects the story.
Instructions:
Read through all of the instructions of this assignment.
Read all of the unit resources.
Select one of the short stories to write about.
Your audience for this essay is people who have read the stories.
Your essay prompt is: How does Setting affect/contribute to the plot of your chosen story?
Your essay will have the following components:
o A title page
o An Introduction
o A thesis at the end of the introduction that clearly states how setting affects the story
o Supporting sections that defend your thesis/focus of the essay
o Text support with properly cited in-text citations
o A concluding paragraph
o A re.
ENG 130 Literature and Comp Literary Response for Point o.docxchristinemaritza
ENG 130: Literature and Comp
Literary Response for Point of View as a Device
Essay for Eng130: Point of View/Perspective
Sources: All of the short stories and plays you have read so far in this course.
Prompt (what are you writing about?):
Choose any of the literature that you have read in this course and choose one of the
following options:
a. In 3 pages or more, write an additional part of the story from a different character’s
perspective (example: write from Fortunatos’ perspective as he is being walled up
in to the catacombs, or perhaps from the perspective of Mrs. Hutchinson as she
prepares food on the morning of The Lottery).
OR
b. In 3 pages or more, write an additional part of the story from a different point of
view than that in which the story is written (example: write from the 1st person point
of view of the man in “To Build a Fire” as he realizes he is going to freeze to death,
or perhaps from the first person point of view of Cory in Fences as his father
blocks his dreams of going to college. Let the reader know what is going on in
their minds).
Note: Take a moment to email your instructor with your creative plan so that you know you
are on the right track.
Instructions (how to get it done):
Choose any of the short stories or plays you have read in this course.
Write a 3 or more page response in which you write an additional part of the story
from a different character’s perspective or a character’s different point of view.
Your audience for this response will be people who have read the stories.
Requirements:
Your response should be a minimum of 3 pages.
Your response should have a properly APA formatted title page.
It should also be double spaced, written in Times New Roman, in 12 point font and
with 1 inch margins.
You should have a reference page that includes the piece of literature you chose.
Please be cautious about plagiarism.
Be sure to read before you write, and again after you write.
Rubric for Point of View Response
Does Not Meet
Expectations
0-11
Below
Expectations
12-13
Needs
Improvement
14-15
Satisfactory
16-17
Meets
Expectations
18-20
Content
Writing is
disorganized or
not clearly
defined and/or
shows a
misunderstanding
of the task.
Writing is
minimally
organized. Use of
different
perspective is
underdeveloped.
Writing is
effective. Use of
different
perspective is
basic and
requires more
creativity.
Writing contains
related, quality
paragraphs. Use
of different
perspective is
effective
Writing is
purposeful and
focused. Use of
different
perspective is
highly effective
and thought
provoking.
Vocabulary/
Word Choice
Word choice is
weak.
Language and
phrasing is
inappropriate,
repetitive or lacks
meaning.
Dialogue, if used,
sounds forced.
Word choice is
limited.
Language and
phrasing lack
inspiration.
Dialogue, if used,
.
ISO/IEC 27001, ISO/IEC 42001, and GDPR: Best Practices for Implementation and...PECB
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His expertise extends across a diverse spectrum of reporting, database, and web development applications, underpinned by an exceptional grasp of data storage and virtualization technologies. His proficiency in application testing, database administration, and data cleansing ensures seamless execution of complex projects.
What sets Denis apart is his comprehensive understanding of Business and Systems Analysis technologies, honed through involvement in all phases of the Software Development Lifecycle (SDLC). From meticulous requirements gathering to precise analysis, innovative design, rigorous development, thorough testing, and successful implementation, he has consistently delivered exceptional results.
Throughout his career, he has taken on multifaceted roles, from leading technical project management teams to owning solutions that drive operational excellence. His conscientious and proactive approach is unwavering, whether he is working independently or collaboratively within a team. His ability to connect with colleagues on a personal level underscores his commitment to fostering a harmonious and productive workplace environment.
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it describes the bony anatomy including the femoral head , acetabulum, labrum . also discusses the capsule , ligaments . muscle that act on the hip joint and the range of motion are outlined. factors affecting hip joint stability and weight transmission through the joint are summarized.
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Beyond Degrees - Empowering the Workforce in the Context of Skills-First.pptxEduSkills OECD
Iván Bornacelly, Policy Analyst at the OECD Centre for Skills, OECD, presents at the webinar 'Tackling job market gaps with a skills-first approach' on 12 June 2024
Philippine Edukasyong Pantahanan at Pangkabuhayan (EPP) CurriculumMJDuyan
(𝐓𝐋𝐄 𝟏𝟎𝟎) (𝐋𝐞𝐬𝐬𝐨𝐧 𝟏)-𝐏𝐫𝐞𝐥𝐢𝐦𝐬
𝐃𝐢𝐬𝐜𝐮𝐬𝐬 𝐭𝐡𝐞 𝐄𝐏𝐏 𝐂𝐮𝐫𝐫𝐢𝐜𝐮𝐥𝐮𝐦 𝐢𝐧 𝐭𝐡𝐞 𝐏𝐡𝐢𝐥𝐢𝐩𝐩𝐢𝐧𝐞𝐬:
- Understand the goals and objectives of the Edukasyong Pantahanan at Pangkabuhayan (EPP) curriculum, recognizing its importance in fostering practical life skills and values among students. Students will also be able to identify the key components and subjects covered, such as agriculture, home economics, industrial arts, and information and communication technology.
𝐄𝐱𝐩𝐥𝐚𝐢𝐧 𝐭𝐡𝐞 𝐍𝐚𝐭𝐮𝐫𝐞 𝐚𝐧𝐝 𝐒𝐜𝐨𝐩𝐞 𝐨𝐟 𝐚𝐧 𝐄𝐧𝐭𝐫𝐞𝐩𝐫𝐞𝐧𝐞𝐮𝐫:
-Define entrepreneurship, distinguishing it from general business activities by emphasizing its focus on innovation, risk-taking, and value creation. Students will describe the characteristics and traits of successful entrepreneurs, including their roles and responsibilities, and discuss the broader economic and social impacts of entrepreneurial activities on both local and global scales.
Chicago-Kent Law ReviewVolume 65Issue 3 Symposium on the S.docx
1. Chicago-Kent Law Review
Volume 65
Issue 3 Symposium on the Seventh Circuit as a
Commercial Court
Article 12
October 1989
Director's Responsibilities and Shareholders'
Interests in the Aftermath of Paramount
Communications v. Time, Inc.
Robert E. Bull
Follow this and additional works at:
http://scholarship.kentlaw.iit.edu/cklawreview
Part of the Law Commons
This Notes is brought to you for free and open access by
Scholarly Commons @ IIT Chicago-Kent College of Law. It has
been accepted for inclusion in
Chicago-Kent Law Review by an authorized administrator of
Scholarly Commons @ IIT Chicago-Kent College of Law. For
more information, please
contact [email protected]
Recommended Citation
Robert E. Bull, Director's Responsibilities and Shareholders'
Interests in the Aftermath of Paramount Communications v.
Time, Inc., 65 Chi.-
Kent. L. Rev. 885 (1989).
Available at:
3. COMMUNICATIONS V TIME, INC.
ROBERT E. BULL*
INTRODUCTION
One reason for the formation of corporations was the desire of
busi-
nessmen to establish a fund of property distinct from the
property of any
of the members' or their debts, and from the vagaries of descent
and
distribution when the members died.' A further purpose in
incorporat-
ing was the maintenance of the members' individual property
separate
from that of the corporation and, presumptively, free from
claims of the
corporation's creditors. 2 The structure of corporate control can
be
viewed as pyramidal in nature, with the shareholders forming
the pyra-
mid's broad base 3 and exercising their control, for the most
part, by se-
lecting the individuals who serve on the board of directors. 4
Although
shareholders do not take part in the daily running of the
corporation, as
owners they have ultimate control over its policies 5 However,
the ad-
vent of the business judgment rule, which protects directors'
informed
business decisions from court scrutiny, has led to the erosion of
share-
holder control. This problem is particularly troublesome in the
area of
4. mergers and acquisitions, where directors' desires may conflict
with
shareholders' interests.
Between 1895 and 1904, a wave of mergers occurred and
resulted in
a number of near monopolies. 6 Mergers from the second wave,
from
1920 to 1929, resulted in many oligopolies (i.e., markets with
few sell-
* The author would like to thank Professor Philip N. Hablutzel
for his patient assistance and
guidance and Jeffrey R. Platt for his thoughtful suggestions and
encouragement in the development
of this Note.
1. A. CONRAD, R. KNAUSS & S. SIGEL, ENTERPRISE
ORGANIZATION 40 (4th ed. 1987).
2. Id.
3. R. HOWELL, J. ALLISON & R. PRENTICE, BUSINESS
LAW-TEXT AND CASES 834 (4th ed.
1988). See also Booth, Is There Any Valid Reason Why Target
Managers Oppose Tender Offers?, 14
SEC. REG. L.J. 43, 48-49 (1986) ("A corporation is like a
contract between shareholders and man-
agement. The shareholders agree to invest, and management
agrees to do its best to generate a
return on that investment.").
4. Id.
5. Id.
6. Comment, Business Judgment Rule: A Benchmark for
Evaluating Defensive Tactics in the
5. Storm of Hostile Takeovers, 31 VILL. L. REv. 1439, 1439 n.1
(1986).
CHICAGO-KENT LAW REVIEW
ers).7 Following World War II, a third wave of mergers
involved corpo-
rations in different industries, or conglomerates.8 The next
period of
intense mergers occurred from 1966 to 1970 and once more
involved
conglomerate mergers. 9 Recently, merger activity has again
intensified,
resulting in 16,285 mergers involving $510.9 billion in
assets.10
Various reasons account for this increased merger activity.
"First,
the potential acquiror may believe that it can increase the
profits of the
target by replacing the target's management."'I Second, one
corporation
may seek to acquire another corporation for an "economies of
scale" rea-
son-namely the reduction in production and marketing costs
associated
with a larger scale of operation. 12 "Third, management of an
acquiring
corporation may take over a target corporation in order to
diversify, and
thus, maintain corporate stability." 1 3 "Fourth, managers may
seek to
expand the size of their corporation because increased income
and pres-
6. tige are customarily associated with large conglomerates." 1 4
However,
empirical data illustrates that the acquiring corporation often
loses
money after its merger is successful.' 5 Finally, a corporation
may want
to assure uninterrupted access to raw materials, market outlets,
new
technology, or research capacity.
Balanced against the directors' desire to increase company
prestige
and size is their duty to make decisions that are in the
shareholders' best
interests. The directors occupy a fiduciary relationship to the
corpora-
tion and must exercise the care of an ordinary prudent and
diligent per-
son in a like position and under similar circumstances.' 6 This
duty is
codified in many states. For example, in California, a director
must per-
form duties, "in good faith, in a manner such director beieves to
be in
the best interest of the corporation, and with such care,
including reason-
able inquiry, as an ordinarily prudent person in a like position
would use
under similar circumstances."'
7
7. Id.
8. Id.
9. Id.
7. 10. Id.
11. Comment, Business Judgment Rule: A Benchmark for
Evaluating Defensive Tactics in the
Storm of Hostile Takeovers, 31 VILL. L. REv. 1439 n.2 (1986).
12. Id.
13. Id.
14. Id.
15. See Asquith, Merger Bids; Uncertainty, and Stockholder
Returns, 11 J. FIN. ECON. 51, 81
table 9 (1983) (value of successful and unsuccessful bidder's
stock often decreased during 240 days
after outcome of merger contest determined).
16. Francis v. United Jersey Bank, 87 N.J. 15, 36, 432 A.2d
814, 824 (1981) (also known as the
duty of care).
17. CAL. CORP. CODE § 309(a) (West 1989).
[Vol. 65:885
DIRECTORS' RESPONSIBILITIES
When a company attempts to thwart an unsolicited takeover, the
courts apply the business judgment rule in deciding whether
directors
have fulfilled their duty of care in responding to a takeover
attempt.1 8
Under the business judgment rule, a court will defer to any
board of
directors' decision as long as the directors can show that their
8. decision
has a rational basis. Therefore, the business judgment rule will
protect
directors who act in good faith from personal liability for mere
errors of
judgment or want of prudence, short of clear and gross
negligence.' 9
Although the directors must make an "informed" decision to fall
under
the business judgment rule's protection, the directors may still
violate
their duty of care by not giving appropriate attention to an
important
corporate matter (e.g., a hostile takeover attempt) and not
seeking expert
advice when it is clearly needed. 20 Another problem arises
when, as a
result of a merger, stock values go down. In this case,
shareholders may
lose present value of their stock while their directors hide
behind the
protection of the business judgment rule, even though they'have
not fur-
thered the shareholders' best interests.
The problems associated with increased corporate merger and
take-
over activity have been the subject of much debate. 2' The
deluge of case
law22 and scholarly23 concern has focused on the directors'
responsibili-
18. R. HOWELL, J. ALLISON & R. PRENTICE, supra note 3,
at 895.
19. Shlensky v. Wrigley, 95 Ill. App. 2d 173, 237 N.E.2d 776
9. (1st Dist. 1968). See also Johnson
& Millon, Does the Williams Act Preempt State Common Law
in Hostile Takeovers?, 16 SEC. REG.
L.J. 339, 360 (1989) ("The purpose and effect of the business
judgment rule is to safeguard board
decisions on corporate enterprise matters from judicial second-
guessing and to spare directors from
personal liability").
20. R. HOWELL, J. ALLISON & R. PRENTICE, supra note 3,
at 903.
21. See generally Block & Miller, The Responsibilities and
Obligations of Corporate Directors in
Takeover Contests, 11 SEC. REG. L.J. 44 (1983); Easterbrook
& Fischel, The Proper Role of a Tar-
get's Management in Responding to a Tender Offer, 94 HARV.
L. REV. 1161 (1981) [hereinafter
Easterbrook & Fischel, Proper Role]; Easterbrook & Fischel,
Takeover Bids, Defensive Tactics, and
Shareholders' Welfare, 36 Bus. LAW. 1733 (1981) (hereinafter
Easterbrook & Fischel, Takeover
Bids]; Freund, Mergers and Acquisitions" The Quintessence of
Change, 36 CLEV. ST. L. REV. 495
(1988); Gilson & Kraakman, Delaware's Intermediate Standard
for Defensive Tactics: Is There Sub-
stance to Proportionality Review?, 44 Bus. LAW. 247 (1989);
Lipton & Brownstein, Takeover Re-
sponses and Directors' Responsibilities - An Update, 40 Bus.
LAW. 1403 (1985); Reder, The
Obligation of a Director of a Delaware Corporation to Act as an
Auctioneer, 44 Bus. LAW. 275 (1989).
22. See, e.g., Mills Acquisition Co. v. Macmillan, Inc., 559
A.2d 1261 (Del. 1989) (directors
10. duties); Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc.,
506 A.2d 173 (Del. 1986) (directors
must maximize the company's value at a sale for the
stockholders' benefits) (Although there were
two Revlon decisions, I and II, for purposes of this note, I will
refer to Revlon 11 only and cite to it as
Revlon); Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946
(Del. 1985) (directors can authorize a
self-tender, to the exclusion of a hostile shareholder, if the self-
tender is in the shareholders' best
interests); Robert M. Bass Group, Inc. v. Evans, 552 A.2d 1227
(Del. Ch. 1988) (directors' choice to
restructure the corporation to thwart off a takeover attempt);
City Capital Assoc. v. Interco, Inc.,
551 A.2d 787 (Del. Ch. 1988) (directors may have to let
shareholders choose between takeover offer
and corporate restructuring).
23. See supra note 21 and accompanying text.
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CHICAGO-KENT LAW REVIEW
ties and duties during a takeover attempt and the concomitant
share-
holder rights. However, the scales are tipped toward the
directors'
decisions, with only grossly negligent decisions falling outside
the pro-
tected realm.
24
11. While the law of mergers and acquisitions is constantly in a
state of
flux, 25 courts seem content to give directors carte blanche in
determining
the viability of the corporation. Several times after Delaware
courts
26
took a small step toward protecting shareholders' interests, it
eliminated
those advances with larger steps backwards.
27
This Note will discuss the courts' expanded protection of
directors'
decisions under the loose requirements of the business judgment
rule.
Directors' decisions are easily rationalized to pass muster under
the busi-
ness judgment rule. First, new defensive mechanisms constantly
add to
the directors' arsenal. 28 Second, directors can reject takeovers
for finan-
24. See Smith v. Van Gorkom, 488 A.2d 858, 873 (Del. 1985)
(directors' decisions that are
grossly negligent are not afforded the protection of the business
judgment rule). See also Joseph E.
Seagram & Sons v. Abrams, 510 F. Supp. 860, 861 (S.D.N.Y.
1981) (directors cannot sell all of a
corporation's assets in a "scorched earth policy" to thwart off a
takeover attempt, and hide behind
the protection of the business judgment rule); Post Smith v. Van
Gorkom: Director Liability Legisla-
12. tion with a Proactive Perspective, 36 CLEV. ST. L. REV. 559
(1988) [hereinafter Post Smith]. The
author states that the Van Gorkom decision strips directors of
the protective cloak of the business
judgment rule when they act with gross negligence. Id. at 559.
25. Freund, supra note 21, at 500.
26. While this Note is not written exclusively for application to
Delaware law, Delaware's sta-
tus as a corporation haven has resulted in a voluminous amount
of precedent in the area of mergers
and acquisitions, and most of the seminal cases concerning
directors' duties and responsibilities dur-
ing hostile takeovers have come from its courts. See, e.g., Post
Smith, supra note 24. The Delaware
Supreme Court's inherent power in corporate America is
unmatched, and its influence transcends to
all industries and companies of every size. Id. at 567. The
Delaware courts' speed and expertise in
resolving corporate issues has made Delaware the number one
state for business incorporation. Id.
at 571. See also Fischel, The Business Judgment Rule and the
Trans Union Case, 40 Bus. LAW.
1437, 1454 (1985) (Delaware offers corporations a solid body of
precedents, is receptive to value-
increasing transactions, and realizes that allowing firms
flexibility in structuring their affairs benefits
investors-the result is an overwhelming number of firms
incorporating in Delaware).
27. For example, the court in Unocal held that the directors'
decision to undertake a self-tender
to defeat a hostile takeover from a shareholder known to be a
greenmailer was protected by the
business judgment rule as necessary to protect the shareholders
13. and the corporate enterprise. 493
A.2d at 958. Greenmail refers to a practice of acquiring a
substantial block of a company's shares,
and receiving a substantial premium for those shares from the
corporation in a buy-back. The cor-
poration usually buys back shares held by a potential bidder
when they perceive a threat from the
shareholder or an outsider, and the company wants to strengthen
its position. See Block & Miller,
supra note 21, at 62. However, also in Unocal, the court stated
that directors may consider other
constituencies (Le., creditors, customers, employees and
possibly the community generally) when
deciding whether to reject a takeover bid. 493 A.2d at 955.
These added considerations given to the
directors, especially in light of the increase in defensive
mechanisms (e.g., "Pac-Man," self-tender,
"Poison Pill," etc.-to be discussed more fully later), may allow a
director to reject a takeover
attempt, which may be in the shareholders' best interest, but
conflict with another constituency.
This rejection could, arguably, be protected by the business
judgment rule even though it's not
within the best interests of the shareholders, but the directors
"believe" the rejection to be a valid
corporate decision.
28. For example, there is the "Pac-Man" defense, where a target
company attempts its own
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DIRECTORS' RESPONSIBILITIES
14. cial, legal, and other reasons. 29 Third, directors can consider
other con-
stituencies (i.e., creditors, customers, employees, or the general
community) 30 when responding to a takeover attempt. Fourth,
the stan-
dard for abuse of a director's business judgment is very difficult
to
meet.31 The heavy burden is stacked against any challenger.
Fifth, legis-
latures, by enacting antitakeover statutes,32 have placed their
stamps of
approval upon directors' responses to takeovers. By
implementing these
statutes, legislatures allow corporations to incorporate in their
state with
built-in defensive mechanisms, thereby sanctioning their
takeover re-
sponses as legitimate and rational business decisions. Lastly,
this Note
will discuss the added implications of the Delaware Supreme
Court's re-
cent decision of Paramount Communications v. Time, Inc.
After examining the effects of Time, as meshed with current
mergers
and acquisitions law, the Note concludes that the business
judgment rule
has been expanded beyond its intended purpose, and that
something
must be done to protect the rights of shareholders from
expropriation.
I. BUSINESS JUDGMENT RULE
As a precursor to any discussion about which directors'
decisions
15. the business judgment rule protects, the workings and
parameters of the
rule must be set forth. Initially, a distinction must be made
between the
intrinsic fairness standard 33 and the business judgment rule,
and when
each applies. Under the intrinsic fairness standard, the burden
of proof
takeover of the would-be acquiring company (a counteroffer
takeover). See Martin Marietta Corp.
v. Bendix Corp., 549 F. Supp. 623 (D. Md. 1982); Lipton &
Brownstein, supra note 21, at 1419. In
addition, there are various types of Share Purchase Rights Plans
or "Poison Pills," whereby a pur-
chaser who reaches a certain percentage of stock ownership (30,
20, or 15%) triggers the Plan and
the remaining shareholders can redeem their present stock with
the acquiring company's stock at a
2:1 ratio, therefore making the target company less appealing
for a takeover since the value of the
acquiring company is diluted. See Moran v. Household Int'l
Inc., 500 A.2d 1346 (Del. 1985) (court
upheld directors implementation of a Rights Plan to protect
corporation from potential takeover);
Lipton & Brownstein, supra note 21, at 1424. For a more
thorough discussion of defensive mecha-
nisms, see infra notes 53-141.
29. See Unocal, 493 A.2d at 955.
30. Id. But cf Revlon, 506 A.2d at 182 (other constituencies are
permissible to consider only if
there is also a "rationally related benefit accruing to the
stockholders"). For a listing of the states
which include an "other constituencies" provision in their
16. antitakeover statutes, see infra note 139.
31. The standard for director liability is gross negligence,
closely approximating fraudulent be-
havior. See Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985)
and Post Smith, supra note 24, at 559.
32. For a list of the states which have enacted antitakeover
statutes, see Note, The Delaware
Takeover Statute: Constitutionally Infirm even under the Market
Participant Exception, 17 HOFSTRA
L. REV. 203 (1988).
33. Sinclair Oil Corp. v. Levien, 280 A.2d 717 (Del. 1971). The
intrinsic fairness test shifts the
burden of proof onto the directors to prove, subject to careful
judicial scrutiny, that its transaction
was objectively fair. Id. at 720. See also AC Acquisitions Corp.
v. Anderson, Clayton & Co., 519
A.2d 103, 115 (Del. Ch. 1986).
19891
CHICAGO-KENT LAW REVIEW
falls on the directors to justify their decisions. In contrast,
under the
business judgment rule, directors enjoy a rebuttable
presumption of
sound business judgment which will not be disturbed if the
decision can
be attributed to any rational business purpose. 34 In the latter
circum-
stance, once the court determines that the directors have shown
17. a ra-
tional basis for their decision, it will not substitute its own
judgment for
that of the directors. 35 Under Delaware law, the cardinal
precept of cor-
porate law is that directors, not shareholders, manage the
business affairs
of the company. 36 From this premise flows certain fundamental
fiduci-
ary obligations owed to the company and its shareholders. 37
Generally,
the courts recognize two components of the fiduciary obligation
owed to
the company and shareholders. Not so coincidentally, these
same two
components are part of the business judgment rule. The two
components
are a duty of care and a duty of loyalty owed to both the
company and
the shareholders.
38
A portion of the duty of care is satisfied when the directors
make an
informed decision about whether a takeover offer is in the best
interests
of the company. 39 In addition to an informed decision, the
directors
must act in good faith and with an honest belief that the action
taken is
in the best interests of the company 4 0 Also, the duty of care
applies to
34. See, e.g., Whittaker Corp. v. Edgar, 535 F. Supp. 933, 950
(N.D. Ill. 1982); Unocal Corp. v.
18. Mesa Petroleum Co., 493 A.2d at 954; Sinclair, 280 A.2d at
720; Robert M. Bass Group, Inc. v.
Evans, 552 A.2d 1227, 1239 (Del. Ch. 1988).
35. See cases cited supra note 34. While most business
decisions are presumed to be of sound
business judgment, if the decision is a defensive reaction to a
takeover bid, the directors must over-
come the burden placed upon them by Unocal. This burden is
met when the directors act reasonably
in relation to the threat posed by the takeover bid. 493 A.2d at
955. Thus, all defensive actions
taken by a board must meet the Unocal "proportionality" test,
see Gilson & Kraakman, supra note
21, while non-defensive decisions are presumed sound.
36. See Aronson v. Lewis, 473 A.2d 805 (Del. 1984). The
Aronson court cited DEL. CODE
ANN. tit. 8, § 141(a) (1982):
"The business and affairs of a corporation organized under this
chapter shall be managed
by or under the direction of a board of directors .... "
Id. at 811. See also Paramount Communications v. Time, Inc.,
571 A.2d 1140, 1154 (Del. 1989);
Ivanhoe Partners v. Newmont Mining Corp., 535 A.2d 1334,
1341 (Del. 1987); Unocal, 493 A.2d at
953; Pogostin v. Rice, 480 A.2d 619, 624 (Del. 1984).
37. See supra note 36 and accompanying text.
38. Polk v. Good, 507 A.2d 531, 536 (Del. 1986). See also
Ivanhoe, 535 A.2d at 1345; Smith v.
Van Gorkom, 488 A.2d 858, 872 (Del. 1985); Reder, supra note
21, at 276; Warden, The Boardroom
19. as a War Room: The Real World Applications of the Duty of
Care and the Duty of Loyalty, 40 Bus.
LAW. 1431 (1985); Comment, Business Judgment Rule: A
Benchmark for Evaluating Defensive Tac-
tics in the Storm of Hostile Takeovers, 31 VILL. L. REV. 1439,
1447 (1986) (Courts usually recognize
duty of care and a duty of loyalty as the two components to the
business judgment rule).
39. Van Gorkom, 488 A.2d at 872 (an informed decision is
made after the directors have con-
sidered all material information reasonably available to them);
Comment, supra note 38, at 1447-48
(duty of care requires an informed decision about whether the
takeover offer is in the target com-
pany's best interests).
40. Moran v. Household Int'l Inc., 500 A.2d 1346, 1356 (Del.
1985); Unocal, 493 A.2d at 954;
Aronson, 473 A.2d at 812.
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DIRECTORS' RESPONSIBILITIES
directors' responses to either threats originating from third
parties or
from other shareholders. 4' In Unocal Corp. v. Mesa Petroleum
Co., the
Delaware Supreme Court added a further element to balance the
duty of
care obligation. According to the court in Unocal:
[if] a defensive measure is to come within the ambit of the
20. business
judgment rule, it must be reasonable in relation to the threat
posed.
42
Thus, unless... the directors' decisions were primarily based on
per-
petuating themselves in office, or some other breach of
fiduciary duty
such as fraud, overreaching, lack of good faith, or being
uninformed, a
Court will not substitute its judgment for that of the board.
4 3
To state Unocal's "proportionality test"" another way, "when the
business judgment rule applies to adoption of a defensive
mechanism, the
initial burden will lie with the directors."14 The directors must
have rea-
sonable grounds for believing that a danger poses a threat to
company
policy and effectiveness, and the defensive mechanism must be
reason-
able in relation to the threat posed. 46 Many courts hold that
when a
board consists of a majority of outside, independent directors
and its de-
cision is in accordance with the foregoing standards, its
decision is pro-
tected by the business judgment rule.
4 7
41. Unocal, 493 A.2d at 955. But see Easterbrook & Fischel,
21. Proper Role, supra note 21, at
1199-1204. The authors suggest that directors should act
passively in response to a takeover offer.
They suggest that any action taken by the directors after the
takeover offer was made must be shown
to have been undertaken for the economic benefit of the
company, and not merely undertaken to
defeat the offer. "They also suggest that directors should relax,
not consult any experts, and let
shareholders decide." Easterbrook & Fischel, Takeover Bids,
supra note 21, at 1750.
42. Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946, 955
(Del. 1985). For an extensive
discussion about the Unocal "proportionality" test, see Gilson &
Kraakman, supra note 21.
43. Unocal, 493 A.2d at 958. See also Block & Miller, supra
note 21. The business judgment
rule does not shield directors' conduct which constitutes bad
faith, fraud, overreaching, waste of
corporate assets, or abuse of discretion, all to the detriment of
the shareholders. Id. at 50. See
Panter v. Marshall Field & Co., 646 F.2d 271, 293 (7th Cir.),
cert. denied, 454 U.S. 1092 (1981)
(fraud, bad faith, gross overreaching or abuse of discretion);
Van Gorkom, 488 A.2d at 872 (same);
Pogostin v. Rice, 480 A.2d 619, 627 (Del. 1984) (same);
Sinclair Oil Corp. v. Levien, 280 A.2d 717,
720 (Del. 1971) (same).
44. Gilson & Kraakman, supra note 21.
45. Moran v. Household Int'l Inc., 500 A.2d 1346, 1356 (Del.
1985). To see how the Unocal
test alters the presumption of sound business judgment afforded
22. to non-defensive decisions, see supra
note 35.
46. Moran, 500 A.2d at 1356; Unocal, 493 A.2d at 955.
47. See Ivanhoe Partners v. Newmont Mining Corp., 535 A.2d
1334, 1343 (Del. 1987) (proof
that the board acted in good faith and upon reasonable
investigation is materially enhanced when the
independent directors are in the majority); Moran, 500 A.2d at
1356 (same); Unocal Corp. v. Mesa
Petroleum Co., 493 A.2d 946, 955 (Del. 1985) (same). See also
Martin Marietta Corp. v. Bendix
Corp., 549 F. Supp. 623, 634 (D. Md. 1981), where the court
noted the significance of the make-up
of Marietta's board; namely, that only two of the fourteen
directors were part of Marietta's manage-
ment. But cf. Panter, 646 F.2d at 300-01 (Cudahy, J.,
dissenting). Judge Cudahy thought that a
majority of non-management (independent) directors on a
company's board should not be disposi-
tive. The independents' interest in keeping "their" management,
maintaining their reputations,
1989]
CHICAGO-KENT LAW REVIEW
In addition to successfully fulfilling the duty of care, the
directors
must also fulfill the duty of loyalty. From the directors' status
as a fidu-
ciary, the duty of loyalty requires that the directors act in the
best inter-
23. ests of the shareholders. 48 Therefore, self-dealing, fraud,
overreaching by
the directors, and the other Unocal prohibitions 49 apply to the
duty of
loyalty as they do to the duty of care. If such behavior is shown
to have
occurred during the directors' decisionmaking process, the
directors are
not afforded the protection of the business judgment rule.
Therefore,
mere good faith or an honest belief that the transaction was
entirely fair
will not suffice, and the directors must prove that their decision
was ob-
jectively or intrinsically fair. 50
Starting from the premise that the business judgment rule
protects
good faith and informed business decisions, a logical corollary
concerns
the methods and factors (i.e., defensive mechanisms) that the
directors
can utilize to thrust their decision within the ambit of the rule's
protection.
II. DEFENSIVE MECHANISMS
When directors make a corporate decision, ordinarily the
decision
enjoys a presumption of sound business judgment, which can be
over-
come only by a showing of a breach of a fiduciary duty (e.g.,
fraud, self-
dealing, perpetuation, etc.). 51 If the decision falls within the
ambit of the
business judgment rule, the court will not substitute its own
24. judgment, as
long as there is any rational business purpose attributed to the
decision.
52
However, when directors take a defensive stance in response to
a take-
over offer, the burden of proving that the directors' decision
was an in-
formed decision shifts to the directors, and they must overcome
the two
hurdles expressed in Unocal before their decision will fall
within the am-
bit of the business judgment rule. First, the directors must have
reason-
able grounds for believing that a threat to corporate policy and
effectiveness exists. Second, any defensive mechanism adopted
by the di-
rectors must be reasonable in relation to the threat posed. 53
These addi-
power, prestige, and prominence casts doubts on the premise
that a majority of independent direc-
tors materially enhances the court's finding of good faith and
reasonable investigation.
48. See supra note 38 and accompanying text.
49. See cases cited supra note 43.
50. AC Acquisitions Corp. v. Anderson, Clayton & Co., 519
A.2d 103, 115 (Del. Ch. 1986).
See also supra note 33 and accompanying text.
51. See supra note 43 and accompanying text.
52. See cases cited supra note 34.
53. Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946, 955
25. (Del. 1985). See also Paramount
Communications v. Time, Inc., 571 A.2d 1140, 1152 (Del.
1989); Moran v. Household Int'l Inc., 500
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DIRECTORS' RESPONSIBILITIES
tional duties are triggered because of the likelihood that the
directors
may act primarily in their own interests during a takeover
response (i.e.,
to defeat a tender offer and keep their board intact).
54
While the enhanced Unocal duty is not supposed to allow a
corpora-
tion "to have unbridled discretion to defeat any perceived threat
by any
Draconian means available," 55 most directors' decisions fall
under the
expanded reach of the business judgment rule. One reason why
direc-
tors' decisions almost always fall under the rule's protection is
the in-
creasing number of defensive mechanisms within the directors'
arsenal.
5 6
Directors not only have the right, but a duty to oppose any offer
which
26. they believe will harm the corporation.
7
In recent years, the number of defensive mechanisms has only
been
limited by the ingenuity of attorneys. 58 For purposes of this
Note, only
four recent, yet well-established defensive mechanisms will be
discussed.
They are: (1) the Shareholder Rights Plan; (2) the sale of a
valuable asset;
(3) a self-tender; and (4) a retaliation counter offer for the
shares of the
attempted takeover company.
First, the Shareholder Rights Plan ("Poison Pill") was approved
by
the Delaware Supreme Court in Moran v. Household
International, Inc.
5 9
Household's management adopted the Rights Plan, not in
response to an
actual threat, but rather as a pre-takeover move to make the
company
less vulnerable to a takeover attack.60 The Plan was
implemented to
A.2d 1346, 1356 (Del. 1985); City Capital Assoc. v. Interco,
Inc., 551 A.2d 787, 796 (Del. Ch. 1988);
AC Acquisitions, 519 A.2d at 113.
54. Revlon Inc. v. MacAndrews & Forbes Holdings, Inc., 506
A.2d 173, 180 (Del. 1986); Uno-
27. cal, 493 A.2d at 954. See also Easterbrook & Fischel, Takeover
Bids, supra note 21. During a tender
offer, if a conflict of interest exists, the business judgment rule
should not apply to directors' deci-
sions. Frequently, when a tender offer is made, the replacement
of the incumbent managers would
appear inevitable if the tender offer was successful; therefore,
the application of the business judg-
ment rule in these situations should be questioned. Id. at 1745.
55. Unocal, 493 A.2d at 955.
56. Supra note 28 and accompanying text. See also Greene &
Junewicz, A Reappraisal of Cur-
rent Regulation of Mergers and Acquisitions, 132 U. PA. L.
REV. 647, 682, 700-06 (1984), for a
discussion of the "Pac-Man," "scorched earth," "crown jewel,"
fair price, and "Poison Pill" de-
fenses; Lipton & Brownstein, supra note 21, at 1414-26;
Comment, supra note 38, at 1440-42.
57. Block & Miller, supra note 21, at 47; Comment, supra note
38, at 1452. See also Ivanhoe
Partners v. Newmont Mining Corp., 535 A.2d 1334, 1345 (Del.
1987) (directors have both the duty
and responsibility to oppose threats); Unocal, 493 A.2d at 954
("board's power to act derives from its
fundamental duty and obligation to protect the corporate
enterprise... ").
58. The dominant defensive mechanisms have included: the
"Poison Pill," "crown jewel,"
"white knight," "Pac-Man," and self-tender. For a more
comprehensive discussion of the various
defensive mechanisms, see supra note 11. Also, with the
addition of states' antitakeover statutes,
28. directors faced with a hostile takeover have an array of
weaponry to thwart off the attack. See, e.g.,
Booth, The Promise of State Takeover Statutes, 86 MICH. L.
REV. 1635 (1988); Hablutzel & Selmer,
Hostile Corporate Takeovers: History and Overview, 8 N. ILL.
U.L. REV. 203 (1988).
59. 500 A.2d 1346 (Del. 1985).
60. Id. at 1349.
19891
CHICAGO-KENT LAW REVIEW
make takeovers, especially "bust-up" takeovers, 6' more
difficult. The
Plan contained two triggers: (1) where a tender offer for thirty
percent of
Households shares was made, or (2) where any single entity or
group
acquired a twenty percent block of Household shares. 62 If
either of the
triggering events occurred, and a successful tender offer
resulted, House-
hold shareholders could acquire shares of the tender offeror's
company at
one-half the market value of the shares.
63
The Moran court upheld the Rights Plan as a valid exercise of
the
directors' business judgment. Even though the court stated that
the Plan
29. was "adopted to ward off possible future advances, and not a
mechanism
adopted in reaction to a specific threat," 64 it held the Plan
legitimate
because it did not destroy the assets of Household, impair
Household's
financial flexibility or the market price of its stock, or usurp the
share-
holders' right to receive tender offers. 65 While the Plan deters
virtually
all hostile tender offers, it is not absolute. Household's
directors, if faced
with a tender offer, would still have to meet the Unocal test.66
Both in
enacting the Rights Plan (or any other defensive mechanism)
and in de-
ciding whether to redeem the Plan during a takeover attempt,
the direc-
tors had to satisfy the Unocal requirements of perceiving a
threat to
corporate policy and effectiveness and adopting a defensive
mechanism
reasonable in relation to the threat posed, 67 and by showing
good faith
and reasonable investigation. 68 Since the Court believed that
the House-
hold directors complied with these requirements, the directors'
decision
to adopt the Rights Plan was a legitimate business decision, and
there-
fore, was afforded the protection of the business judgment rule.
Before considering the other defensive mechanisms, Moran
must be
distinguished from other cases because the Rights Plan was not
adopted
30. in response to any actual takeover attempt, but rather to make
any take-
over attempt more difficult to consummate. In contrast, the
remaining
defensive mechanisms are done in response to a takeover
attempt.
Therefore, other factors may be considered by the directors in
determin-
ing whether to oppose the takeover offer and adopt a defensive
stance.
These factors include the "inadequacy of the price offered,
nature and
61. Id.
62. Id. at 1348.
63. Id. at 1349. For a discussion of Moran, see Comment, supra
note 38, at 1460-67; Lipton &
Brownstein, supra note 21, at 1424.
64. Moran, 500 A.2d at 1350.
65. Id. at 1354.
66. Id.
67. See supra notes 35 and 45 and accompanying text.
68. Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946, 955
(Del. 1985) (citing Cheff v.
Mathes, 199 A.2d 548, 555 (Del. 1964)).
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DIRECTORS' RESPONSIBILITIES
timing of the offer, questions of illegality, the impact on
'constituencies'
31. other than shareholders (i.e., creditors, customers, employees,
and per-
haps even the community generally), the risk of
nonconsummation, and
the quality of securities being offered in the exchange."
69
One caveat must be noted. While Unocal included consideration
of
the impact of the takeover on "other constituencies," the same
Delaware
Supreme Court, one year later in Revlon, Inc. v. MacAndrew &
Forbes
Holdings, Inc., added that the consideration of "other
constituencies,"
although permissible, has limitations. 70 In Revlon, the court
held that
such considerations are only permissible when "there are
rationally re-
lated benefits accruing to the stockholders.
7 1
The second type of defensive mechanism is the sale of a
valuable
asset ("Crown Jewel") to another corporation (sometimes called
a
"White Knight"), 72 to make the target company less attractive
to the
potential acquiror. 73 In Whittaker Corp. v. Edgar, the court
found that
the sale of an asset which makes a company less attractive to a
tender
offeror can fall within the protection of the business judgment
rule.
32. 74
However, directors may not sell all of a company's assets in a
"scorched
earth" policy 75 to thwart a takeover attempt and then expect to
hide be-
hind the business judgment rule's protection. Another potential
draw-
back of a "crown jewel" approach is that finding a friendly
buyer for a
particular asset and then restructuring one's business to adjust
for the
loss of the asset are time-consuming, complicated, and costly.
7 6
The third type of defensive mechanism is a self-tender, where
the
company buys back its shares from its shareholders at a price
substan-
tially above the bidder's price. 77 In Unocal Corp. v. Mesa
Petroleum Co.,
69. Id.
70. Revlon, 506 A.2d at 182.
71. Id.
72. Comment, supra note 38. "A 'white knight' is the friendly
corporation with which a target
corporation arranges to merge in order to avoid being taken
over by a raider." Id. at 1441 n.3. See
also Lipton & Brownstein, supra note 21, at 1421, stating that
issuing stock to a "friendly" holder
can be a valid defense to a hostile takeover. Greene & Junewicz,
supra note 56, at 701, 705.
33. 73. Whittaker Corp. v. Edgar, 535 F. Supp. 933 (N.D. Ill. 1982).
See also Lipton & Brown-
stein, supra note 21. By selling off those assets that are most
attractive to the bidder, the target may
cause the bidder to go away. Id. at 1418. "This tactic may be
effective if the bidder values some
aspect of the target's assets more highly than does the target
itself." Id.
74. Whittaker, 535 F. Supp. at 951.
75. A scorched earth policy concerns the directors attempt to
defeat a hostile takeover attempt
by selling the company's assets until the company is rendered
worthless. See Joseph E. Seagram &
Sons v. Abrams, 510 F. Supp. 860, 861 (S.D.N.Y. 1981) (court
refused to apply the business judg-
ment rule to the management's scorched earth policy to destroy
the company rather than have their
tenure as directors ended by a raider who successfully takes
over the company).
76. Lipton & Brownstein, supra note 21, at 1419.
77. Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del.
1985). See also Lipton & Brown-
stein, supra note 21, at 1416, noting that self-tenders pose two
problems. First, using a self-tender
19891
CHICAGO-KENT LAW REVIEW
34. the court upheld Unocal's discriminatory self-tender on the
basis of the
business judgment rule. 78 The court believed that the self-
tender, which
discriminated against Mesa (a 13% shareholder and a known
green-
mailer), 79 was reasonable in relation to the threat posed by
Mesa's coer-
cive two-tier 80 offer that was inadequate in price and offered
poor quality
securities (Le., junk bonds).8 1 The court approved of Unocal's
sacrificing
one short-term shareholder (Mesa), who was a speculator, in the
interests
of long-term loyal investors.8 2 Again, because the directors
exercised
good faith and conducted a reasonable investigation, as required
by their
duty to protect the corporate enterprise,8 3 the business
judgment rule
protected their decision as having a rational business purpose.
8 4
The fourth type of defensive mechanism is to retaliate by
making a
tender offer for the company making the takeover attempt. For
example,
the court in Martin Marietta Corp. v. Bendix Corp.,S5 upheld
the "Pac-
Man ' 8 6 defense as a valid defense to a takeover attempt. In
Martin, Ben-
dix made a tender offer for Martin Marietta. Marietta responded
by
making a counter tender offer for Bendix by borrowing
enormous
35. may not appear attractive to shareholders faced with a takeover
bidder's any-and-all cash tender
offer. Second, large-scale self-tender offers are only possible
when a target has sufficient unrestricted
assets to support large borrowing or can successfully effectuate
a crown jewel sale. Id. See also
Comment, supra note 38, at 1453-60, discussing Unocal.
78. Unocal, 493 A.2d at 958.
79. See supra note 27 and accompanying text. See also Lipton &
Brownstein, supra note 21. A
greenmailer, who accumulates stock and poses a threat of a
takeover attempt or proxy fight, does not
strive to acquire the company, but to be bought out at a good
price. Id. at 1413. Such stock repur-
chases have been sustained by the courts under the business
judgment rule, when such repurchases
are for a legitimate business purpose and not solely for
entrenching management. Id. at 1414.
80. Two-tier offers are recognized as "classic coercive
measure[s] designed to stampede share-
holders into tendering at the first tier, even if the price is
inadequate, out of fear of what they will
receive at the back end of the transaction." Unocal, 493 A.2d at
956. See also Greene & Junewicz,
supra note 56, at 679-81; Lipton & Brownstein, supra note 21,
at 1412-13.
81. Junk bonds are typically high-yielding, low-credit bonds or
preferred stocks, frequently
with variable rate or exchangeability options with warrants or
other equity "kickers." Id. at 1411-
12. Junk bond financed deals subject the target company to a
36. bust-up sale of assets to finance the
takeover. Id.
82. Unocal, 493 A.2d at 955-56. See also Comment, supra note
38, at 1458-59.
83. Unocal, 493 A.2d at 958.
84. For a more in-depth discussion of Unocal, see Comment,
Unocal Corp. v. Mesa Petroleum
Co., 72 VA. L. REV. 851 (1986); Comment, Unocal Corp. v.
Mesa Petroleum Co.: The Selective Self-
Tender - Fighting Fire with Fire, 61 NOTRE DAME L. REV.
109 (1985).
85. Martin Marietta Corp. v. Bendix Corp., 549 F. Supp. 623
(D. Md. 1982).
86. The "Pac-Man" defense refers to a target company's
counteroffer for the shares of the
would-be acquiror. Block & Miller, supra note 21, at 64. The
"Pac-Man" defense has certain
liabilities. First, it requires a great many unsecured assets or a
large amount of free cash. Second, a
counteroffer waives the target's assertion of antitrust violation
created by the merger, and implicitly
signifies a desirability by the target's board to merge. Lipton &
Brownstein, supra note 21, at 1420.
For a discussion of Martin Marietta, see Greene & Junewicz,
supra note 56, at 700-01.
[Vol. 65:885
DIRECTORS' RESPONSIBILITIES
37. amounts of money to finance the tender offer.8 7 The court held
that
Marietta's directors had acted in a manner reasonably believed
to be
within the best interest of Bendix' shareholders. 8 Marietta's
belief that
its tender offer would best suit its needs, rather than Bendix', 8
9 was held
to be a valid reason for the counteroffer.
III. THE EFFECTS OF THE EXPANDED BUSINESS
JUDGMENT RULE
A. Cases that Seemingly Protect Shareholders
Next to the Unocal case, Revlon, Inc. v. MacAndrews & Forbes
Holdings, Inc. is the most influential decision on a directors'
duties dur-
ing a takeover attempt.90 Revlon is important because it limits
the appli-
cability of Unocal when the company is up for sale. As the
Revlon court
found, if it becomes "inevitable" that a target company will be
sold, the
directors' duties change appreciably:
[t]he duty of the board had thus changed from the preservation
of Rev-
lon as a corporate entity to the maximization of the company's
value at
a sale for the shareholders' benefit. This significantly altered
the
board's responsibilities under the Unocal standards. It no longer
faced
threats to corporate policy and effectiveness, or to the
stockholders'
38. interests, from a grossly inadequate bid. The whole question of
defen-
sive measures became moot. The directors' role changed from
defend-
ers of the corporate bastion to auctioneers charged with getting
the
best price for the stockholders at a sale of the company. 91
In Revlon, a bidding war for Revlon between a hostile party and
a
friendly bidder resulted in a lock-up 92 agreement and a no-
shop 93 provi-
sion with the friendly bidder; however, the directors had already
author-
ized management to sell the company. The court found that the
buyout
and lock-up agreement with the friendly bidder, Forstmann
Little, signi-
fied that the Revlon directors were amenable to the idea of
selling the
87. Martin Marietta, 549 F. Supp. at 625. See also Greene &
Junewicz, supra note 56, at 700
n.262.
88. Bendix was a shareholder in Marietta, and therefore,
Marietta's decision to make a counter-
offer had to take account of both Bendix' and Marietta's
shareholders' interests. Martin Marietta,
549 F. Supp. at 633.
89. Id.
90. Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506
A.2d 173 (Del. 1986).
91. Id. at 182. See also Ivanhoe Partners v. Newmont Mining
Corp., 535 A.2d 1334 (Del.
39. 1987) (discussing when Revlon and Unocal duties kick in);
Gilson & Kraakman, supra note 21, at
253 n.26; Reder, supra note 21.
92. A lock-up option is an arrangement under which a target
agrees to sell part of its assets to a
friendly suitor if the raider obtains control of the target. Revlon,
506 A.2d at 178, 182-84; Comment,
supra note 38, at 1441 n.3.
93. Revlon, 506 A.2d at 178, 184. A no-shop provision prevents
a target company from enter-
taining any additional takeover bids. See also Comment, supra
note 38, at 1477.
1989]
CHICAGO-KENT LAW REVIEW
company. 94 At that point, the "sale" of Revlon was inevitable
and the
directors' role changed from a defender to an auctioneer. 95
Therefore,
determining when a sale of the company occurs is a critical
question.
The directors' determination could either: (1) require the Unocal
"pro-
portionality" test, or (2) require the Revlon auction standard.
96
Because there is no consensus 97 concerning the appropriate
behavior
40. of directors under attack by a hostile takeover, the directors'
survival
instinct governs takeover responses. 9 In addition to the litany
of factors
that Unocal stated are permissible for a director to consider
during a
takeover,99 the standard for proving that a board of directors
has acted
with such gross negligence as to place its decision outside the
protection
of the business judgment rule seems insurmountable.
The Delaware Supreme Court in Aronson v. Lewis, 100 held
that
"under the business judgment rule director liability is predicated
upon
concepts of gross negligence."' 10 1 More recently, the court
reaffirmed the
gross negligence standard 10 2 and expressed an opinion as to
what "mini-
mum" requirements a director must meet. First, the court stated
that
fulfilling a fiduciary obligation "requires more than the mere
absence of
bad faith or fraud."
10 3
[The directors] cannot succumb to influences which convert an
other-
wise valid business decision into a faithless act. On the other
hand, the
duty of care requires a director, when making a business
decision, to
proceed with a 'critical eye' by acting in an informed and
deliberate
41. manner respecting the corporate merits of an issue before the
board. 14
Therefore, the requirement that a business judgment must be an
in-
formed one requires that the directors inform themselves about
all mate-
rial information reasonably available to them before making a
94. Revlon, 506 A.2d at 182; Comment, supra note 38, at 1478.
95. Revlon, 506 A.2d at 182. But see Reder, supra note 21, at
280-82, stating that a simple
"change in control" attack does not trigger the Revlon duties.
Only when it is clear that the target is
going to be broken up and its effectiveness destroyed do Revlon
duties arise.
96. Gilson & Kraakman, supra note 21, at 253 n.26.
97. Greene & Junewicz, supra note 56, at 700 n.265.
98. Id. at 700.
99. These factors included: the "inadequacy of the price offered,
the nature and timing of the
offer, questions of illegality, the impact on 'constituencies'
other than shareholders (ie., creditors,
customers, employees, and perhaps even the community
generally), the risk of nonconsummation,
and the quality of securities being offered in the exchange."
Unocal Corp. v. Mesa Petroleum Co.,
493 A.2d 946, 955 (Del. 1985).
100. 473 A.2d 805 (Del. 1984).
101. Id. at 812. See also Sinclair Oil Corp. v. Levien, 280 A.2d
717, 722 (Del. 1971) (fraud or
42. gross and palpable overreaching); supra note 43 and
accompanying text.
102. Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985). See also
Post Smith, supra note 24.
103. Van Gorkom, 488 A.2d at 872.
104. Ivanhoe Partners v. Newmont Mining Corp., 535 A.2d
1334, 1345 (Del. 1987). See also
Van Gorkom, 488 A.2d at 872; Aronson v. Lewis, 473 A.2d 805,
816 (Del. 1984).
[Vol. 65:885
DIRECTORS' RESPONSIBILITIES
decision. 10 5
On the basis of that line of reasoning, the Delaware Supreme
Court
in Smith v. Van Gorkom held that the directors' decision to
enter into a
merger agreement was uninformed and grossly negligent.
Therefore, the
court would not defer to the directors' decision as a valid
exercise of the
business judgment rule. Several factors contributed to the
court's deci-
sion. First, the directors accepted an offer without investigating
whether
a higher price could be obtained, and without investigating the
value of
its company prior to the sale.t °1 6 Second, the directors "were
grossly neg-
ligent in approving the 'sale' of the company upon two hours
43. considera-
tion, without prior notice, and without the exigency of a crisis
or
emergency." 10 7 Also, at the board meeting, no documents
concerning
the merger agreement were present. The directors relied entirely
upon
CEO Van Gorkom's twenty minute oral presentation. 0 8 In
addition to
the fact that Van Gorkom himself came up with the fifty-five
dollar per
share offer price,' ° 9 and that no documentation was given as to
the ade-
quacy of the fifty-five dollar price per share offer, the
"widespread view
of Senior Management [was] that the timing of the offer was
wrong and
the offer inadequate."' 10 Lastly, the court considered the
impact that the
merger agreement had on the company-namely, that it precluded
the
company from receiving or soliciting any other offers."'I As a
result of
these findings, the court denied the directors the protection of
the busi-
ness judgment rule, and the case was remanded to determine an
award of
damages. "1
2
B. Cases Illustrating Directors' Power
While one may think that the "gross negligence" standard of
direc-
tor liability, the Unocal "proportionality test," and the Revlon
44. "auction"
limitation to Unocal adequately protect shareholders' interests,
the above
checks and balances are pro-director and are relatively safe
from attack
105. Van Gorkom, 488 A.2d at 872.
106. Id. at 874. See also Post Smith, supra note 24, at 559.
107. Van Gorkom, 488 A.2d at 874. See also Post Smith, supra
note 24, at 562-63.
108. See case cited supra note 107.
109. Van Gorkom, 488 A.2d at 877 n.19.
110. Id. at 877.
111. Thus, this aspect of the Merger Agreement acted similar to
the no-shop provision struck
down by the Revlon court. See supra note 93.
112. Smith v. Van Gorkom, 488 A.2d 858, 893 (Del. 1985). For
a discussion of Van Gorkom,
see Fischel, The Business Judgment Rule and the Trans Union
Case, 40 Bus. LAW. 1437 (1985).
Fischel notes that the Trans Union (Van Gorkom) case sent a
signal to firms to obtain fairness letters
or similar documents from outside consultants before making
decisions to change the corporation.
He further asserts that shareholders are the biggest losers after
Trans Union, because a company can
always procure an expert to state that a tender price is a fair
market premium price. Id. at 1453.
1989]
CHICAGO-KENT LAW REVIEW
45. by disgruntled shareholders. The general consensus that
shareholders
are "protected" is exemplified by one scholar's statement that
the "Van
Gorkom decision stripped corporate directors and officers of the
protec-
tive cloak formerly provided by the business judgment rule .... "
13 The
discussion that follows disputes that statement, as well as the
view that
shareholders are adequately protected.
An important factor that materially enhances a board of
director's
decision as one made in good faith is that the decision was
made by a
board comprised of a majority of independent directors.1 1 4
Having a
board thus composed lessens the probability that the board acted
out of
motives that are designed to entrench their positions in the
corpora-
tion.11 5 However, in the Seventh Circuit Court of Appeal's
decision in
Panter v. Marshall Field & Co.,1 6 Judge Cudahy stated in his
dissenting
opinion that:
[t]he fact that Field's may have had a majority of non-
management
(independent) directors is hardly dispositive. The interaction
between
management and board may be very strong even where, as here,
a rela-
tionship of symbiosis seems to prevail over the normal
46. condition of
"management domination."
[Tihe very idea that, if we cannot trace with precision a mighty
flow of
dollars into the pockets of each of the outside directors, these
directors
are necessarily disinterested arbiters of the stockholders'
destiny, is ap-
pallingly naive.
Directors of a New York Stock Exchange-listed company are, at
the very least, "interested" in their own positions of power,
prestige,
and prominence . . . . They are "interested" in defending against
outside attack[s against] the management which they have, in
fact, in-
stalled or maintained in power-"their" management (to which, in
many cases, they owe their directorships). And they are
"interested"
in maintaining the public reputation of their own leadership and
stew-
ardship against the claims of "raiders" who say that they can do
better. "1
7
These concerns seriously call into question the blind faith that
courts
have placed on such directors' decisions."
t 8
113. Post Smith, supra note 24, at 559.
114. See supra note 47 and accompanying text.
115. See supra note 47 and accompanying text. See also Panter,
47. 646 F.2d at 300 n.1 ("hostile
tender offers unavoidably create a conflict of interest...,
[because] nearly all directors and manag-
ers are interested in maintaining their compensations and
perquisites"); Warner Communications,
Inc. v. Murdoch, 581 F. Supp. 1482, 1491 (D. Del. 1984) (ifa
target company fails to exercise its
business judgment and engages instead in entrenchment tactics,
such defensive actions are
illegitimate).
116. 646 F.2d 271 (7th Cir.), cert. denied, 454 U.S. 1092
(1981).
117. Id. at 300-01 (Cudahy, J., dissenting).
118. See supra note 47 and accompanying text.
[Vol. 65:885
DIRECTORS' RESPONSIBILITIES
Furthermore, Judge Cudahy argued that the Panter decision
shred-
ded any remaining constraints which would preclude directors
from
placing their own interests before the interests of the
shareholders when
responding to a takeover offer. 11 9 In a harsh critique of the
majority's
decision, Judge Cudahy:
emphatically disagree[d] that the business judgment rule should
clothe
directors, battling blindly to fend off a threat to their control,
48. with an
almost irrebuttable presumption of sound business judgment,
prevail-
ing over everything but the elusive hob goblins of fraud, bad
faith or
abuse of discretion.
1 20
Judge Cudahy's dissenting opinion goes to the heart of the
problem
associated with the business judgment rule. First and foremost,
the
"gross negligence" standard is too stringent a requirement for
sharehold-
ers to meet. While the Van Gorkom court expressly stated that
neither
an outside valuation study (to determine the value of the
company) nor a
fairness opinion by an independent investment banker is
required to sup-
port an informed business judgment,1 21 the Van Gorkom
decision has
implicitly given mergers and acquisition players its stamp of
approval on
the use of valuation studies and fairness opinions to render a
board's
decision informed. 122 This conclusion seems reasonable in
light of the
difficulty in proving gross negligence, fraud, and self-dealing.
Another example of the insurmountable odds that shareholders
face
when they challenge the board of directors' decisions is the
"scorched
earth" policy involved in the United States District Court for the
49. South-
ern District of New York's decision in Joseph E. Seagram &
Sons.
123
119. 646 F.2d at 299. The Panter court upheld a board's decision
to reject a takeover offer based
on its preference to remain an independent company. Thus, a
board's desire to build value within
the company is a rational business purpose for rejecting a
takeover believed to diminish the value of
the company. Id. at 296. The directors' decision to "just say no"
to a takeover not thought to be in
the best interests of the company has been upheld as a valid
defensive decision. See Amanda Acqui-
sitions Corp. v. Universal Foods Corp., 877 F.2d 496, 499 n.4
(7th Cir.), cert. denied, 110 S. Ct. 367
(1989); Panter, 646 F.2d 271; Crouse-Hinds Co. v. Internorth,
Inc., 634 F.2d 690 (2d Cir. 1980).
The Panter majority also upheld, under the business judgment
rule, the board's decision to file
an antitrust suit as a defensive block to the takeover attempt.
646 F.2d at 297. Such a suit chal-
lenges the legality of the takeover attempt. Id. See Unocal Corp.
v. Mesa Petroleum Co., 493 A.2d
946, 955 (Del. 1985), for the litany of factors directors can
consider when deciding to reject or
effectuate the takeover offer. See also Whittaker Corp. v. Edgar,
535 F. Supp. 933, 950 (N.D. Ill.
1982) (Section 7 of the Clayton Act allows a private right of
action to obtain an injunction against an
unlawful acquisition posed by a takeover bid); Block & Miller,
supra note 21, at 55.
50. 120. Panter, 646 F.2d at 299.
121. Smith v. Van Gorkom, 488 A.2d 858, 876 (Del. 1985).
122. Fischel, supra note 112, at 1453.
123. Joseph E. Seagram & Sons v. Abrams, 510 F. Supp. 860
(S.D.N.Y. 1981). See also Block &
Miller, supra note 21, at 61, stating that partial or complete
liquidation of the target by its board
(scorched-earth defense) rests on the target's assumption that
the entity is worth more "dead than
alive." However, most state corporation laws, including
Delaware's, require sales of "all or substan-
tially all" of a company's assets to be submitted for shareholder
approval, but the term "all or
1989]
CHICAGO-KENT LAW REVIEW
The "scorched earth" violation, as well as the gross negligence
perpe-
trated in Van Gorkom, demonstrate the extremity that directors
must
accomplish before the courts will interject into their decisions.
With the
exception of these two extreme cases, directors have carte
blanche to de-
termine the destiny of their shareholders' company.
An added weapon provided to directors to thwart a hostile
takeover
is the antitakeover statute which many states have enacted over
the past
few years. 124 Directors using these statutes as a basis for
51. implementing a
defensive mechanism now have the stamp of approval of the
state's
legislature.
After the United States Supreme Court in CTS Corp. v.
Dynamics
Corp. of America 125 upheld the constitutionality of the Indiana
Control
Share Acquisitions Statute, the states were given the green light
to pro-
mulgate antitakeover statutes. The CTS decision, therefore,
makes the
Court's decision to strike down Illinois' first generation 12 6
antitakeover
substantially all" is narrowly construed; thereby many
transactions involving the sale of assets never
reach the shareholders. Id. at 62.
124. See, e.g., ARIZ. REV. STAT. ANN. §§ 10-1201 to 1223
(Supp. 1988); CONN. GEN. STAT.
ANN §§ 33-374a to 374c (West 1987); DEL. CODE ANN. tit. 8,
§ 203 (Supp. 1988); FLA. STAT. ANN.
§§ 607.109-.110 (West Supp. 1988); GA. CODE ANN. §§ 14-2-
1131 to 1133 (Supp. 1988); HAW.
REV. STAT. §§ 415-171 to 172 (1985 & Supp. 1987); IDAHO
CODE §§ 30-1601 to 1614, 30-1701 to
1710 (Supp. 1988); Illinois Corporate Takeover Law, Public Act
86-126 (effective Aug. 2, 1989);
IND. CODE ANN. §§ 23-1-42-1 to 11, 23-1-42-1 to 24 (West
Supp. 1988); Ky. REV. STAT. ANN.
§§ 271B.I-010-271B.18-060 (Michie/Bobbs-Merill Supp. 1989);
LA. REV. STAT. ANN. §§ 12:135-
:140.2 (West Supp. 1988); ME. REV. STAT. ANN. tit. 13-A, §
611-A (Supp. 1988); MD. Bus. REG.
52. CODE ANN. §§ 3-202, 3-601 (1985); MAss. GEN. LAWS ANN.
chs. IlOC-I10E (West Supp. 1988);
MICH. COMp. LAWS ANN. §§ 450.1775-.1784 (West Supp.
1988); MINN. STAT. ANN. §§ 302A.671,
302A.673 (West Supp. 1989); Miss. CODE ANN. §§ 79-25-1 to
9 (Supp. 1988); Mo. ANN. STAT.
§§ 351.407, 351.459 (Vernon Supp. 1989); NEB. REV. STAT.
§§ 21-2431 to 2453 (Supp. 1988); NEV.
REV. STAT. ANN. §§ 78.378-.3793 (Michie Supp. 1987); N.J.
STAT. ANN. §§ 14A:IOA-1 to 6 (West
Supp. 1988); N.Y. Bus. CORP. LAW §§ 513, 912 (McKinney
1986); N.C. GEN. STAT. §§ 55-9-01-55-
9A-09 (Supp. 1990); OHIO REV. CODE ANN. §§ 1701.83-.85
(Anderson 1985 & Supp. 1987); OKLA.
STAT. ANN. tit. 18, §§ 1145-1155 (West Supp. 1989); S.C.
CODE ANN. §§ 35-2-101 to 111, 35-2-201
to 226 (Law. Co-op. Supp. 1988); TENN. CODE ANN. §§ 48-
35-201 to 209, 48-35-301 to 312 (1988);
UTAH CODE ANN. §§ 61-6-1 to 12 (Supp. 1988); VA. CODE
ANN. §§ 13.1-725 to 727 (Supp. 1988);
WASH. REV. CODE ANN. §§ 23A.50.010-.901 (Supp. 1989);
WIS. STAT. ANN. § 180.726 (West
Supp. 1988).
125. 481 U.S. 69 (1987).
126. The first generation statutes were the states' first attempts
to codify provisions into law that
would enable in-state corporations to protect themselves against
hostile takeovers. These statutes
met their demise with the Supreme Court's decision in Edgar v.
MITE Corp., 457 U.S. 624 (1982).
See Hablutzel & Selmer, Hostile Corporate Takeovers" History
and Overview, 8 N. ILL. U.L. REV.
203, 210-13 (1988).
53. The next form of takeover statutes, second generation statutes,
was given some approval by the
Supreme Court's decision in CTS. However, the second
generation statutes came in three different
forms: business combination, fair price, and control share
acquisition statutes. A business combina-
tion statute precludes any person who buys, for example, 20%
or more of a company's stock from
acquiring the company for a certain period of time (e.g., five
years) unless the purchaser of stock had
board approval to purchase the stock. Id. at 214. A fair price
statute requires shareholders to vote
to ratify any business combinations, unless two-thirds of the
disinterested directors approve the busi-
ness combination or all shareholders receive a fair price for
their shares, as computed by a specific
[Vol. 65:885
DIRECTORS' RESPONSIBILITIES
statute in Edgar v. MITE Corp.127 less prohibitive to states
attempting to
formulate an antitakeover statute which can pass constitutional
muster.
The Indiana Act involved in CTS provides states with a model
with
which to compare their own statutes. The states were given an
added
shot of confidence when the Seventh Circuit upheld the
constitutionality
of Wisconsin's Anti-Takeover Statute. 128 Seventh Circuit
Judge Easter-
brook, who strongly believes in director passivity during
54. takeovers,
t 29
wrote the opinion in Amanda Acquisition Corp. v. Universal
Foods Corp.
upholding the Wisconsin law, even though he stated that "[1like
our col-
leagues who decided MITE and CTS, we believe that
antitakeover legis-
lation injures shareholders." 3 0 The problem associated with
antitakeover statutes is that they preclude shareholders from
receiving or
accepting a premium offer. Thus, shareholders and the economy
are
worse off because the higher bid reflects the better use to which
the bid-
der can put the target's assets to.'
3 '
For instance, Wisconsin's Anti-Takeover Statute does not add
op-
tions to a company's desire to give its directors more discretion
to deter-
mine the salability of a takeover offer; instead, it destroys the
possibility
of divergent choices. 3 2 Under the Wisconsin law, "[u]nless the
target's
board agrees to the transaction in advance, the bidder must wait
three
years after buying the shares to merge with the target or acquire
more
than 5% of its assets." 3 3 While the Seventh Circuit stated its
dislike and
skepticism of antitakeover statutes, it concluded that such
55. skepticism
does not mean that the law is beyond the state's power. '34
formulation. Id. Lastly, a control share acquisition statute
applies to acquisitions of shares which
surpass a threshold as established by the directors (e.g., one-
fifth, one-third, or a majority of the
voting power). Thus, such acquisitions are prohibited unless the
acquiror procures prior authoriza-
tion by obtaining a majority vote of both shareholders and
disinterested shareholders. Id. at 214-15.
For a comparison of the three forms of second generation
statutes, see generally id. at 226-29.
After the Supreme Court, in CTS, upheld the constitutionality of
Indiana's statute, many states
enacted third generation statutes assuming that the CTS
decision placed its general stamp of ap-
proval on all forms of antitakeover statutes. See Steinberg,
Federal Preemption of State Anti-takeover
Statutes: The Time for Congressional Action is Now, 16 SEC.
REG. L.J. 80, 83-85 (1988); Johnson &
Millon, Does the Williams Act Preempt State Common Law in
Hostile Takeovers?, 16 SEC. REG. L.J.
339 (1989). Both of the above cited articles provide support for
the argument that the Williams Act
may preempt states from regulating merger activity via state
antitakeover statutes.
127. 457 U.S. 624 (1982). The Supreme Court held that Illinois'
Anti-Takeover Statute was
unconstitutional, because it violated the Williams Act and the
Commerce Clause.
128. Amanda Acquisitions Corp. v. Universal Foods Corp., 877
F.2d 496 (7th Cir.), cert. denied,
56. 110 S. Ct. 367 (1989).
129. See Easterbrook & Fischel, Proper Role, supra note 21.
130. Amanda, 877 F.2d at 500.
131. Id. at 500-01. See also Easterbrook & Fischel, Proper Role,
supra note 21.
132. Amanda, 877 F.2d at 502.
133. Id. at 497-98.
134. Id. at 502.
CHICAGO-KENT LAW REVIEW
The significance of the antitakeover statutes is that legislatures
have
now condoned the directors' use of defensive mechanisms. How
can a
court, confronted with a board's implementation of a defensive
mecha-
nism sanctioned by a state legislature 135 and by the United
States
Supreme Court, 36 hold that the board's action falls outside the
scope of
the business judgment rule-especially in light of the gross
negligent
standard for abusive behavior? Thus, these statutes only
legitimize the
shareholders' feelings that they have no say in the control of
"their"
company.
The following example illustrates the potency of these statutes.
On
August 2, 1989, Governor Thompson of Illinois signed into law
major
57. amendments to the Illinois Business Corporation Act as it
relates to cor-
porate takeovers. 37 One of the most profound provisions,
promulgated
in 1985, concerned the legislature's granting directors the
option of con-
sidering the impact of the takeover on "other constituencies,"'' 3
but only
in the context of considering the best long-term and short-term
interests
of the company. 39 The significance of this provision is that
directors,
who are supposed to make corporate decisions to maximize
shareholder
welfare, can now justify their decisions by considering the
impact of their
135. See statutes cited supra note 124.
136. See CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69
(1987); Edgar v. MITE Corp.,
457 U.S. 624 (1982); Amanda Acquisitions Corp. v. Universal
Foods Corp., 877 F.2d 496 (7th Cir.),
cert. denied, 110 S. Ct. 367 (1989).
137. Illinois Corporate Takeover Law, Public Act 86-126
(effective Aug. 2, 1989 amended
§§ 6.05, 8.85, and adding § 11.75).
138. See Unocal Corp. v. Mesa Petroleum Co. 493 A.2d 946,
955 (Del. 1985), stating that direc-
tors can consider "other constituencies" (e.g., employees,
creditors, the community, etc.) when con-
sidering a takeover attempt. See also Revlon, Inc. v.
MacAndrews & Forbes Holdings, Inc., 506
A.2d 173, 182 (Del. 1986), where the court imposed a limitation
58. on the consideration of "other
constituencies." Cf. Eizenstat & Fullerton, Crying Wolf on
Takeovers, NAT'L L.J. 13 (1989). The
recently passed Exon-Florio provision of the Omnibus Trade
Act provides another consideration for
directors during a takeover attempt. However, the Exon-Florio
provision was initially designed to
apply to friendly transactions, not to be misused by directors
opposing hostile takeovers. The Exon-
Florio provision authorizes the President to investigate and
block foreign acquisitions that pose a
security risk. The potential abuse arises because every company
is in a national security business
when threatened by an unwanted suitor. This article
demonstrates the breadth of the "other constit-
uencies" consideration, namely that directors can consider the
effects of the takeover bid on the
national security interests of the United States of America. See
also Easterbrook & Fischel, Proper
Role, supra note 21, at 1190-92; Reder, supra note 21. "[I]f a
benefit to the stockholders can be
found, the directors appear able to consider the aggregate of
their 'constituencies,' not just their
shareholders." Id. at 278.
139. Supra note 137, at § 8.85 and supra note 138 and
accompanying text. Other states that
have similar provisions include: Arizona, ARIZ. REV. STAT.
ANN. § 10-1202(A) (1987); Idaho,
IDAHO CODE § 30-1702 (1988); Indiana, IND. CODE § 23-1-
35-1(d) (1988); Kentucky, Ky. REV.
STAT. ANN. § 271B.12-210(4) (Michie/Bobbs-Merrill 1989);
Maine, ME. REV. STAT. ANN. tit. 13-
A, § 716 (1989); Minnesota, MINN. STAT. § 302A.251(5)
(1988); Missouri, Mo. REV. STAT.
§ 351.347 (1988); Nebraska, NEB. REV. STAT. § 21-1983
59. (1989); New Mexico, N.M. STAT. ANN.
§ 53-11-35(D) (1987); Ohio, OHIO REV. CODE ANN. §
1701.59(E) (Anderson 1988); Pennsylvania,
42 PA. CONS. STAT. § 8363 (1989); and Wisconsin, Wis.
STAT. § 180.305 (1987).
[Vol. 65:885
DIRECTORS' RESPONSIBILITIES
decisions on other groups (e.g., customers, creditors, and the
commu-
nity). The interests of these other groups, however, may not
necessarily
comport with shareholder interests or wishes.
In addition to state legislatures condoning directors' decisions
and
the litany of factors that a director can consider when
responding to a
takeover,' 40 the general ease of meeting the business judgment
standard
makes almost any business decision fall within its protection.1
4 ' After
all, under the business judgment rule, the directors' decision
will not be
disturbed if it can be attributed to any rational business
purpose. 1 42 The
ease with which one can formulate any "rational" business
purpose has
the effect of immunizing any directors' decisions from judicial
scrutiny-
save for the rare cases where the board acts with gross
negligence or
60. utilizes fraud, overreaching, or a scorched earth policy. The
Delaware
Supreme Court's most recent decision on the propriety of
directors' ac-
tions during a hostile takeover is the culmination of directors'
carte
blanche ability to unilaterally decide the viability of a
corporation.
IV. PARAMOUNT COMMUNICATIONS V TIME, INC
Illustrative of the abusive treatment shareholders have faced
and
will continue to face is the Delaware Supreme Courts' most
recent deci-
sion, Paramount Communications v. Time, Inc.14 3 According
to one
source, the Time decision may have changed the world for all
corporate
managers, directors, shareholders, and potential acquirors. 144
The Time
decision has enlarged the power of corporate directors in that
they can
run the company as they see fit without seeking a shareholder
vote on
major decisions. 145 Most notably, Time calls into question the
validity of
Unocal's requirement that takeover responses must be
"reasonable" in
relation to the threat posed.
Paramount and various Time shareholders sued Time in a
Delaware
Chancery Court seeking an injunction restraining Time from
consum-
mating a merger with Warner Communications.' 46 On July 14,
61. 1989,
140. Unocal, 493 A.2d at 955.
141. For example, if in Smith v. Van Gorkom, 488 A.2d 858,
876 (Del. 1985), the board was
fully informed, their accumulation of tax credits would have
been an adequate reason to enter into
merger negotiations. Also, if the directors in Joseph E. Seagram
& Sons v. Abrams, 510 F. Supp.
860 (S.D.N.Y. 1981), had only sold some assets or put the sale
of assets decision to a shareholder
vote, their decision would have fallen within the ambit of the
business judgment rule. See supra note
123 and accompanying text.
142. See cases cited supra note 34.
143. 571 A.2d 1140 (Del. 1989).
144. A Legal Victoryfor the Long Term, FORTUNE, August 14,
1989, at 56.
145. Wall St. J., July 25, 1989, at All, col. 1.
146. Time, 571 A.2d at 1141-42.
1989]
CHICAGO-KENT LAW REVIEW
Chancellor William T. Allen refused to issue the injunction
because he
believed that the plaintiffs would be unable to prevail on the
merits.
14 7
62. Plantiffs filed an interlocutory appeal, which the Delaware
Supreme
Court accepted on an expedited basis. On July 24, 1989, the
court orally
affirmed Chancellor Allen's ruling. A revised written opinion
was issued
March 9, 1990.
A. The Genesis of the Time- Warner Merger Agreement 1
48
In 1983-84, Time, one of the largest suppliers of information to
the
populace, 149 decided to expand its entertainment and media
markets. 5 0
Seeking to serve a global economy, Time's management sought
out an
expansive long-term goal. 15' However, because Time wanted to
maintain
its independence and distinctive and important "Time Culture,"''
52 the
board attempted to look for a company with which Time could
merge,
and yet, achieve all of its goals (global economy and Time
culture).
In spring 1987, Time's management contacted Warner
concerning a
joint venture; however, these discussions never led to a
definitive propo-
sal. 153 As an alternative to the failed joint venture with
Warner, in July
147. Id. at 1142.
148. For a comprehensive explanation of the Time/Warner
63. merger, see Saporito, The Inside
Story of TIME WARNER, FORTUNE, Nov. 20, 1989, at 164.
149. Time's business was divided into four divisions:
publication of magazines (Time, People,
Fortune, Sports Illustrated, etc.); publication of books (Book-
of-the-month club, Little, Brown & Co.,
Time-Life Books, etc.); production of pay television programs
HBO and CINEMAX; and ownership
and operation of cable television franchises. Id. at 170.
150. Time's desire to expand its video market created a need to
own a video or film products
company to supply films to its HBO and CINEMAX programs
or fall mercy to the quality and price
whims of unfriendly suppliers. Paramount Communications v.
Time, Inc., 571 A.2d 1140, 1143-44
(Del. 1989).
151. "In 1987, Time established a special committee of
executives to consider and propose cor-
porate strategies for the 1990s." Id. at 1143.
152. Time's "culture" stems from its desire to remain
independent and its "pride in the history
of [its] firm--notably Time Magazine and its role in American
life-and its managerial philosophy
and distinctive structure that is intended to protect journalistic
integrity from pressures from the
business side of the [Time] enterprise." Paramount
Communications v. Time, Inc., No. 10866, at 6-
7 (Del. Ch. July 14, 1989) (LEXIS, States Library, Del.); Time,
571 A.2d at 1143 n.4, 1152. See also
supra note 119 and accompanying text. Time's unique structure
of having the Editor in Chief report
64. directly to a special committee of the board of directors
protected its "culture" or value of journalis-
tic independence, which Time had found to have been
economically advantageous. Time, No.
10866, at 9 [LEXIS]. However, the court stated that since
Time's magazine business contributes
about 40% to its gross revenue, and will contribute about 20-
25% of the merged Time-Warner's
revenues, then some other motivation besides protecting
journalistic integrity might be underlying
Time's assertion of the defense of "culture." Id. See also What
is Corporate Culture?, THE BANK-
ERS MAGAZINE, Jan.-Feb. 1988, at 33-34, describing in detail
the factors comprising a bank's corpo-
rate culture. For example, the company's personality (i.e.,
culture) is comprised of patterns (beliefs,
behaviors, and assumptions) shared by members of an
organization and learned over time as a result
of past successes. Such a culture is durable, resistant to change,
and requires significant time and
resources for modification. Id.
153. Time, 571 A.2d at 1144. After Time management reviewed
many studios (e.g., Disney,
[Vol. 65:885
DIRECTORS' RESPONSIBILITIES
1988, Time's board approved negotiation of a merger agreement
with
Warner provided, however, that certain conditions be met. 54
Negotia-
tions were shaky because the parties could not agree on a
65. management
structure that satisfied Time's need to ensure continuation of its
"cul-
ture"-which required the ultimate succession of Time executives
to the
senior executive positions. 15 5 They finally agreed to a twenty-
four mem-
ber board equally divided between incumbent directors of both
compa-
nies. However, discussions again broke off in August because of
disagreement concerning who would succeed as the chief
executive
officer. '
5 6
In January 1989, negotiation reopened and the companies
finally
agreed to the succession of Nick Nicholas, Time's President and
Chief
Operating Officer, as the sole CEO of the New Time-Warner
Corpora-
tion. 157 The merger agreement consisted of a stock for stock
deal that
provided Warner shareholders with a 12% premium.'15 The
agreement
was approved by both boards on March 3, 1989. Such a stock
deal re-
quired Time to submit the merger agreement for shareholder
approval. 159
Before Time obtained the necessary shareholder approval,
however,
on June 7, 1989, Paramount made a $175 per share cash offer'
6° for all of
Time's outstanding common stock.' 6 1 The shareholder
66. plaintiffs felt that
MCA-Universal, Columbia, 20th Century Fox, Warner, and
Paramount), Warner was considered
the best fit, based on its outstanding video and film production
capacity and talent, and a substantial
and effective international marketing relationship. Id. at 1144-
45.
154. The negotiations were conditionally approved by a large
majority of outside directors, not a
unanimous number. The approval was conditional on a
"corporate governance" issue, namely that
Time's senior management must be assured succession to the
ultimate control of the combined en-
tity. Id. See also supra notes 47 and 54 and accompanying text,
self-preservation decisions by the
board are not protected by the business judgment rule.
155. Time, 571 A.2d at 1145. See also supra note 152 and
accompanying text.
156. Time, 571 A.2d at 1145.
157. Id.
158. See Paramount Communications v. Time, Inc., No. 10866,
at 11 (Del. Ch. July 14, 1989)
(LEXIS, States Library, Del.). The Delaware Supreme Court's
opinion does not discuss the percent-
age of premium that Warner shareholders would receive, only
that an exchange ratio of .465 was
agreed upon, which gave Warner shareholders 62% ownership
of Time-Warner. Paramount Com-
munications v. Time, Inc., 571 A.2d 1140, 1146 (Del. 1989).
The Share Exchange Agreement gave
each party the option of automatically obtaining shares of the
company should the merger fail to be
67. completed. Time, 571 A.2d at 1146. Warner did trigger its share
rights in Time (11%) after the
Paramount bid. Time, No. 10866, at 12 [LEXIS].
159. Time, 571 A.2d at 1146.
160. Id. at 1147. However, Paramount's offer contained the
following conditions: (1) termina-
tion of the Time-Warner merger agreement; (2) termination of
the Share Exchange Agreement; (3)
approval of all franchise transfers; (4) redemption of Time's
poison-pill plan and removal of other
defensive devices; (5) financing and majority acceptance by
Paramount; and (6) judicial determina-
tion that Delaware's Anti-Takeover Statute was inapplicable to a
Time-Paramount merger. Id.
161. Paramount's any-and-all cash offer is different from a
coercive two-tier offer. See supra
note 80 and accompanying text. While the board does not have
to act passively when confronted
19891
CHICAGO-KENT LAW REVIEW
the signing of the merger agreement, with its effect of
"changing" control
over Time, put Time in "Revlon Mode"'' 62 and required Time
to seek the
best available transaction for the shareholders.' 63 The effect of
Para-
mount's offer caused Time's stock to jump forty-four points in
one
68. day. 164 Time's management immediately attacked Paramount
for
tendering a "smoke and mirrors" offer.' 6 5 Then, Richard
Munro, Time's
Chairman and CEO, stated both that Time had a binding deal
with
Warner and that Time was not for sale. He added that he would
not
even consider what Paramount might be willing to offer on a
negotiated
basis. ' 66 Time ultimately did consider Paramount's offer, but
the consen-
sus of the board was that Time was under a commitment to the
Warner
deal.' 67 After further negotiations with Warner, Time decided
to offi-
cially reject the Paramount offer and change the Warner
transaction
from a stock deal to a cash acquisition of a majority stake in
Warner
with an any-and-all cash offer at a fair price, "a defensive step
that includes a coercive self-tender (or
forced merger as in Time) timed to effectively preclude a
rational shareholder from accepting the
any-and-all offer cannot, in my opinion, be deemed to be
reasonable in relation to any minimal threat
posed to stockholders by such offer." AC Acquisitions Corp. v.
Anderson Clayton & Co., 519 A.2d
103, 114 (Del. Ch. 1986). See also Robert M. Bass Group, Inc.
v. Evans, 552 A.2d 1227, 1243-44
(Del. Ch. 1988) (depriving shareholders of choosing between an
any-and-all offer and a less attrac-
tive offer is unreasonable, directors, as fiduciaries, cannot
"cram down" the shareholders' throat a
less attractive offer in order to "protect" the shareholders from a
69. non-coercive, economically supe-
rior offer-"under Unocal, the directors were obligated to give
the shareholders a choice"); City
Capital Assoc. v. Interco, Inc., 551 A.2d 787, 798 (Del. Ch.
1988) (there may come a time when a
board's fiduciary duty will require the board to permit the
shareholders to choose between a nonco-
ercive offer and another alternative); Gilson & Kraakman, supra
note 21, at 259 ("threats" imposed
by a noncoercive come from the directors' belief that
shareholders will mistakenly accept the offer).
Also, discussing whether Unocal provides directors with a
screen to unilaterally block shareholders
from choosing at all. Id. But cf. Time, 571 A.2d at 1153, where
the court rejected the plaintiffs'
argument that the only threat an all-cash offer poses to
shareholders is an inadequate value. The
court stated that plaintiffs' argument was "a narrow and rigid
construction of Unocal." Id. Further-
more, the court held that Time's board was not "'cramming
down' on its shareholders a manage-
ment-sponsored alternative, but rather had as its goal the
carrying forward of a pre-existing
transaction in an altered form." Id. at 1155 (footnote omitted).
162. Id. at 1149. See also supra note 95 and accompanying text.
In Time, plaintiffs contended
that the Warner merger constituted an implicit decision, as in
Revlon, by Time to transfer control of
the company to Warner-the 62% ownership by Warner after the
merger formed the basis of the
plaintiffs' argument. Time, 571 A.2d at 1146. Defendants
countered that the merger was not in-
tended to sell or transfer control of Time, but to preserve and
improve Time's long-term perform-
ance. Id. at 1144-45.
70. 163. Id. at 1149.
164. See Paramount Communications v. Time, Inc., No. 10866,
at 13 (Del. Ch. July 14, 1989)
(LEXIS, States Library, Del.), for a listing of the increased
price of Time's and Warner's shares after
the Paramount offer.
165. Paramount Communications v. Time, Inc., 571 A.2d 1140,
1147 (Del. 1989).
166. Time, No. 10866, at 13-14 [LEXIS]. For an argument that
directors should allow share-
holders to choose between alternative offers, see supra note
161.
167. See Time, 571 A.2d at 1148, where the Time board stated
that the Paramount deal was
inadequate and posed a threat to Time's retention of its
"culture," while the Warner deal was a
much more attractive deal.
[Vol. 65:885
DIRECTORS' RESPONSIBILITIES
followed by a merger for cash, securities, or a combination of
both. 168
This alternative became the more attractive course to
consummate the
merger because it did not require shareholder approval as the
stock deal
71. had. 169
However, one problem resulted from Time's decision to switch
the
method of consummating the merger with Warner. There was
some
question whether Time's shareholders would applaud the
rejection of a
$175 per share cash offer and give management additional years
to man-
age the value of Time shares to levels substantially higher than
the $175
offer amount. 170 Therefore, the directors felt that the
alternative mode of
acquisition was necessary to consummate the Warner deal and
avoid
shareholders' temptation to grab the Paramount cash offer and
run. 17 1
There were other problems associated with the cash acquisition.
First, whereas the original stock deal provided Warner
shareholders with
a 12% premium for their shares, the new cash acquisition
provided them
with a 56% premium.1 72 Second, as a result of the cash
acquisition,
Time would incur $10 billion in debt, severely reducing its
ability to sup-
port additional borrowing. 173 Third, reported earnings of the
new entity
were expected to be eliminated by the amortization of
approximately $9
billion of goodwill. 1
74
72. On June 23, 1989, in response to Time's revised merger
agreement,
Paramount increased its per-share cash bid to $200.175 Time's
manage-
ment responded to the increased offer with the same factors
relied on to
reject the $175 offer.
176
168. Id.
169. Paramount Communications v. Time, Inc., No. 10866, at 14
(Del. Ch. July 14, 1989)
(LEXIS, States Library, Del.).
170. Paramount Communications v. Time, Inc., 571 A.2d 1140,
1148 (Del. 1989). While Time
advisors established a range of value for Time between $189.88-
212.25, and Paramount's second
offer of $200 fell within that range, another Time advisor
thought that after the merger Time-
Warner would trade at around $150 per share. Time, No. 10866,
at 15 [LEXIS]. Thus, the court
reasoned that most money managers would be tempted by the
cash offered by Paramount now, Id. at
17, even though Time's advisors projected long-term trading
ranges of $159-247 for 1991, $230-332
for 1992 and $208-402 for 1993. Id. at 16.
171. Id. at 17.
172. Id. at 18.
173. Time, 571 A.2d at 1148. See also Wall St. J., July 25,
1989, at 43, Al 1; Saporito, The Inside
Story of TIME WARNER, FORTUNE, Nov. 20, 1989, at 164.
73. Time-Warner paid $451 million in
interest and financing fees and took a $40 million earnings loss
for amortization of good will, con-
tributing to a loss for the third quarter of $176 million. Id. at
208. Moreover, the $200 a share Time
stockholders did not get, at 12% a year, will be worth $352 in
five years, and $621 in ten years.
Recently, Time-Warner's stock was trading at $70 7/8 per share.
Wall St. J., Sept. 26, 1990, at C5.
174. Time, No. 10866, at 18 [LEXIS]. See also Time, 571 A.2d
at 1148 (the court stated that
"[n]ine billion dollars of the total purchase price would be
allocated to the purchase of Warner's
goodwill").
175. Time, 571 A.2d at 1149.
176. Id.
CHICAGO-KENT LAW REVIEW
After Time rejected Paramount's new offer and elected to
acquire
Warner with cash, as opposed to the original stock swap,
Paramount and
various Time shareholders filed suit in Delaware to enjoin
Time's pro-
posed acquisition of Warner. The court began part of its
analysis by stat-
ing that it is not part of the court's function to determine the
adequacy or
inadequacy of the Time-Warner deal for the shareholders.17 7
Time's
shareholders complained that not only did Warner's
74. shareholders receive
a substantial premium (56%) and Time shareholders get little,
but that
they were foreclosed from considering the premium from
Paramount.
78
While the lower court focused its discussion on two questions:
(1) should
the court recognize a distinction between managing for current
max-
imization and managing for longer-term value creation, and (2)
who
should make such choices-the board or the shareholders, 79 the
Supreme Court of Delaware sought to answer the following
question:
"Did Time's board, having developed a strategic plan of global
expansion
to be launched through a business combination with Warner,
come under
a fiduciary duty to jettison its plan and put the corporation's
future in the
hands of its shareholder?"
8 0
From the start, the court tipped the scales in favor of the
directors
as the group best suited to understand the undervaluation of the
com-
pany's stock by the stock market.' 8 ' The court concluded that,
under
Delaware law, directors are under no obligation to maximize the
immedi-
ate value of the corporation or its shares, except when the
75. corporation is
in "Revlon Mode."' 8 2 The lower court held that, "Delaware
law does
recognize that directors, when acting deliberately, in an
informed way,
and in the good faith pursuit of corporate interests, may follow
a course
designed to achieve long-term value even at the cost of
immediate value
maximization." 8 3 The Delaware Supreme Court, while
affirming Chan-
177. Id. at 1151.
178. Id. See also supra notes 161 and 170.
179. Paramount Communications v. Time, Inc., No. 10866, at 21
(Del. Ch. July 14, 1989)
(LEXIS, States Library, Del.). See Easterbrook & Fischel, supra
note 41, discussing the passivity
role managers should assume during takeover bids.
180. Paramount Communications v. Time Inc., 571 A.2d 1140,
1149-50 (Del. 1989).
181. See Time, 571 A.2d at 1150 n.12. See also Time, No.
10866, at 22 [LEXIS], discussing the
undervaluation of stock by the market, and showing two
examples of companies that succeeded after
rejecting a takeover attempt.
182. Time, 571 A.2d at 1150. See also Ivanhoe Partners v.
Newmont Mining Corp., 535 A.2d
1334 (Del. 1987); Revlon, Inc. v. MacAndrews & Forbes
Holdings, Inc., 506 A.2d 173 (Del. 1986).
The court noted that when a board enters into a "change in
control" transaction, it enters "Revlon
76. Mode." Time, 571 A.2d at 1150. Furthermore, a subjective
disinclination to sell the company does
not prevent the Revlon duty from arising when a "change in
control" transaction is involved. See
Time, No. 10866, at 23 [LEXIS]. But cf. Reder, supra note 95 (a
mere "change in control" attack
does not trigger Revlon mode).
183. Time, No. 10866, at 23 [LEXIS]. The court used charitable
contributions as an example of
[Vol. 65:885
DIRECTORS' RESPONSIBILITIES
cellor Allen's decision, thought that it was "unwise to place
undue em-
phasis upon long-term versus short-term corporate strategy."' 8
4 Because
the court believed that the directors' duty to manage the
business and
affairs of the corporation' 8 5 encompassed the "authority to set
a corpo-
rate course of action, including time frame, designed to enhance
corpo-
rate profitability."' 1 6 The court stated that the directors' duty
to set a
corporate course could not be delegated to the shareholders.
187
The lower court also considered the shareholders' assertion that,
under the duty of loyalty, the directors were obliged to let the
sharehold-
77. ers choose whether the company should be sold.' 8 8 This
assertion had
two parts. First, because the directors initially decided to put
the stock
deal merger to shareholder vote, they were committed to let the
share-
holders vote on the merger; therefore, the taking away of the
stockholder
voting right constituted a breach of the duty of loyalty. 8 9
Second,
the Unocal test and its progeny required directors, in some
circumstances
(e.g., the redemption of a "Poison Pill"), to permit shareholders
to choose between two alternative, but functionally equivalent,
transactions. '90
The lower court responded by stating that the directors' refusal
to
consider offers may comport with a valid exercise of business
judg-
ment. ' 9 ' As support, the court cited the litany of factors that
the Unocal
court concluded were valid reasons for rejecting a takeover
offer.'
92
Moreover, the court held that the merger did not constitute a
change in
control, thus triggering "Revlon Mode."' 93 That 62% of the
Time-
Warner shares would be held by former Warner shareholders
was con-
sidered irrelevant. 194 Furthermore, Chancellor Allen held that
the origi-
78. a long-term policy not within the immediate value maximization
interests of the company. Id. at 23
n. 15. However, charitable contributions neither cause $10
billion in debt assumption, nor do they
result in disgruntled shareholders, as a result of taking away the
opportunity to vote on the merger
or choose between alternative deals-thus depriving shareholders
of a premium. See also supra note
161 and accompanying text.
184. Paramount Communications v. Time, Inc., 571 A.2d 1140,
1150 (Del. 1989).
185. See supra note 36 and accompanying text.
186. Time, 571 A.2d at 1150. According to the court, this duty
renders the question of "long-
term" versus "short-term" values irrelevant. Id.
187. Id. at 1154.
188. See supra note 161 and accompanying text.
189. Paramount Communications v. Time, Inc., No. 10866, at 24
(Del. Ch. July 14, 1989)
(LEXIS, States Library, Del.).
190. Id. See also supra notes 41 and 160 and accompanying text.
191. Time, No. 10866, at 26 [LEXIS].
192. See Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946,
955 (Del. 1985).
193. Time, No. 10866, at 26 [LEXIS].
194. Id. The court reasoned that, under some circumstances, a
stock for stock merger could
reflect a "change in control" transaction; however, where the
shares of both companies were widely
held, control remained in the market. Id. This is problematic for
two reasons. First, Warner owned
79. 1989]
CHICAGO-KENT LAW REVIEW
nal merger agreement did not legally preclude or impede a later
sale or
result in a change of control transaction.195
Chancellor Allen's finding that a "change of control" situation
did
not occur was based on the fact that control of Time existed in
the mar-
ket. 196 While the Delaware Supreme Court stated that this
finding was
correct as a matter of law, it rejected the plaintiffs' Revlon
claim on dif-
ferent grounds. The court's decision was based upon the lack of
any
substantial evidence demonstrating the decision of Time's board
to make
"the dissolution or break-up of the corporate entity inevitable
.... ",197
According to the court, Revlon duties arise in two situations:
[1] [W]hen a corporation initiates an active bidding process
seeking to
sell itself or to effect a business reorganization involving a
clear break-
up of the company.
[2] [W]here, in response to a bidder's offer, a target abandons
its long-
term strategy and seeks an alternative transaction involving the
break-
80. up of the company.
198
Therefore, where the board is not abandoning the corporation's
exist-
ence, but merely taking a defensive response to a hostile
takeover, it is
not Revlon duties which arise, but Unocal duties.' 99
The Delaware Supreme Court agreed with Chancellor Allen that
Revlon duties do not arise merely because the transaction may
"be con-
strued as putting a corporation either 'in play' or 'up for sale'. '
'200 More-
over, the court held that "[t]he adoption of structural safety
devices
[such as Time's utilization of a lock-up agreement, no-shop
clause, and
dry-up agreements] 20 1 alone does not trigger Revlon. ' 20 2 A
board's
adoption of such safety devices, the court noted, were subject to
a Unocal
analysis.
If the directors acted in a defensive manner and invoked the
"pro-
portionality" test of Unocal, then under Unocal the directors
were re-
quired to prove that any defensive steps taken by them were
reasonable
62% of the new entity. This must amount to a large block of
shares held by "one" shareholder;
therefore, the court's determination that this was irrelevant
seems incorrect. Second, all companies
81. have ultimate control in the market if they are publicly held.
195. Id. at 27.
196. Paramount Communications v. Time, Inc., 571 A.2d 1140,
1150 (Del. 1989).
197. Id.
198. Id.
199. Id. at 1150-51.
200. Id. at 1151.
201. The dry-up agreements consisted of Time's payment to
various banks for confidence letters
whereby the banks promised not to provide financing for any
potential acquirors of Time. Id. at
1146.
202. Id. at 1151.
[Vol. 65:885
DIRECTORS' RESPONSIBILITIES
in relation to the threat posed. 203 First, the court noted that
Para-
mount's offer was noncoercive. 204 The lower court stated that
it was
"aware of no principle, statute or rule of corporation law that
would hold
that once a board approves an agreement of merger, it loses
power to
reconsider that action prior to a shareholder vote."'205 The
Delaware
Supreme Court, however, stated that noncoercive all-cash, all-
shares of-