The Managed Funds Association (MFA), along with 10 law and business professors, filed an amicus brief that urges the Delaware Supreme Court to protect shareholders’ ability to challenge advance notice bylaws (ANBs).
The amicus brief was filed in response to lower court rulings that threaten to limit such challenges to periods of active proxy contests. MFA argues that this would restrict investor rights, reduce board accountability, and encourage poor corporate governance.
“Damaging bylaws are increasingly used to shield boards from accountability by blocking nominations and discouraging shareholder engagement,” Bryan Corbett, president and CEO of MFA, said. “Delaware courts must enable shareholders to challenge unlawful bylaws before they can be weaponized against investors. Doing so will bolster investor rights, improve corporate governance, strengthen capital allocation, and support U.S. economic competitiveness.”
MFA contends that companies have increasingly imposed unlawful ANBs with “vague rules and excessive disclosure requirements” that they say are designed to make it difficult for shareholders to nominate directors or voice concerns about the corporations in which they invest.
MFA officials add that the lower court rulings risk encouraging even more aggressive bylaws that will prevent proxy contests from ever occurring. The outcome is that many ANBs will never face review, and more companies will be emboldened to adopt “pernicious bylaws.” This, in turn, argues MFA, will lead to investor disenfranchisement and insular corporate boards that lack accountability.
The brief pertains to the Supreme Court’s consideration of the consolidation of two appeals involving shareholder challenges to AES Corporation’s and Owens Corning’s bylaws.