Kyle Pinder on shareholder proposals under Delaware law

Welcome to shareholder Primacy from free float media podcast about activist investing Securities Law and all the ways, the financial and legal worlds, intersect and Collide in real life as followers here. No, I'm usually here with an Lipton, a law professor at the University of Colorado, who teaches in research is Securities and business law. But An aulos is a way this week. I think she's got a paper she's presenting at some conference or something, who knows? So instead. And I invited, Kyle Pinder, an attorney and a partner at the law firm of Morris Nichols in Wilmington. Delaware to talk about a really cool and fascinating paper that he wrote recently. Hello Kyle. I'm Michael. Thank you for having me and I'm sorry, Anne can't be here but I'll try to fill in as best as I can choose to fill. I think you will equip yourself really well and you are coming to us from Wilmington Delaware. I think right? Yep. Live at the corner of 12th and Market Street in Wilmington in Wilmington that that bustling metropolis and center of corporate governance churches exactly. Um Kyle found himself in the news in the last few weeks after he got a really really I suppose pretty good. Shout out from the SEC chair. Wally Atkins about this paper that Kyle put together on the subject of how I hope. I get this right. How Delaware law looks at? Shareholder pracky proposals. Is that, is that the right way to summarize it? Kind of? Yeah, I think that's it. That's a, that's a great way to kind of to tee up the question. Cool. So we were gonna, so we asked, Kyle, I want to talk about the paper and how it came together and what he found and maybe some other fun stuff. So that's what we're going to dig into. Before we do that, I just want to mention, this is usually Anne's job, but I'm gonna do it today. We encourage everybody to get in touch with us, send us your comments, and your suggestions and your questions and your criticism send that to us at shareholder Primacy. One word at free float dot LLC. Once again, that shoulder Primacy of free flow that LLC. Please let us know what you think. Kyle, you can even do that to if you want. That's all good. So now I'm a regular listener so but I have maybe this maybe this will probably yeah. You need to send us an email anyway. All right, let's start with the paper, the title of the paper, which I should say for everybody and it's available in draft form. Now, we're working paper form at ssrn.com is called the non-binding bind reframing, predatory, stockholder proposals under Delaware law, By Kylie, Pinder. So what? Let's start talking about it. What did you find? What was sort of the main main conclusion from all the work you put into this? Yeah. So I think like the Top Line takeaway is that Delaware law is, you know, candidly just silent or absent on really on this topic as, as our most States, because it really doesn't come up all that much on the subject of predatory proposed. Exactly. And whether those are a, you know, a proper subject for, you know, stockholders to raise and bring it in a meeting and at a shareholder meeting at. Exactly. Exactly. And AGM or I guess theoretically a special meeting but those those few and far between. So so Delaware lie. I think what I hear you saying is doesn't really, there's not there's not much in Delaware Lottery, Delaware statue Delaware case, law that even talks about predatory proposals. I think that's part of what we found. Is that is that? That's right. So you, I think you start like for most questions with Delaware law, I said Delaware, General Corporation law, which is, you know, right? Um the dgcl says absolutely nothing about non-binding or predatory proposals generally whether its shareholder or or management proposals, okay? Now before we dig into that, let's most everybody who follows this would know what a predatory proposal is, but just let's establish that take 10 seconds and Define for us. What we mean by these? Yeah, so, a precatory proposal or predatory shareholder or stockholder proposal is a resolution, the stockholder would raise at a meeting and effectively, make a request or recommendation to the board. You know, resolve the shareholders request the board prepare a report on Greenhouse climate or something. Yeah. Right. Exactly or or that the board you know make every effort to create a diverse Workforce. Exactly award or it could request the board amend the bylaws in a certain way that's exactly. That's a big distinction I think among Among the different types of these kind of Preparatory proposals. Yes, there are ones related to environmental social Civic, political issues, and then their, their, the government's proposed, like the true governance proposals. You know, we request the board. Take all necessary action to destab and Illinois, right? Exactly. I think but we'll get into the listener you and your and really did a great job explaining it to the listeners. But when chairman Atkins gave his speech in Delaware, it was it was focused on on the environmental and social. Right. Right. But it but it but I think you're making a broader statement about any kind of predatory recommendation or whatever. Is, is what's on the table here, right? Right. And and you you and you know, in the paper, you went into all sorts of detail to say that basically Delaware, law does not Grant any kind of inherent, right? To a shareholder to have the board included on the agenda for shareholders to vote on it and so on and so forth. I think that's that that's that's exactly right. So going back kind of starting at the Statue there. Okay. Two relevant Provisions. I think that, you know, could be cited one way or the other on this on this relatively novel question? Yeah, the first the first one is section two 11. B of the dgcl, which relates to annual stockholder meeting like that. Yeah. So that authorizes the transaction of any quote, proper business or other proper business, other than the election of directors, okay? And there are two ways to look at that one is, that's just a very broad catch-all that, you know, anything and everything is, you know, it's like about all sorts of stuff at meetings. Yeah. And then The other section, they have the way to look at it is you know it's it is a catch-all it's it's proper business but it's not defined. So you kind of have to look to the other confines of the statute to figure out what that means. Yes. All right, the other relevant provision this got one that's near. And dear to most corporate lawyers, heart is dgcl section 141. I was gonna say 141 and I'm not even a lawyer, how's that? Yeah, exactly. That's that's the one that gets all the, that that gets all the Press. So that's the provision that confers on a board of directors, the power and authority to manage both the business and Affairs of the company. Right. Okay. So and those are but those are really very kind of basic in general. They I mean, the word precatory proposal exactly come up any place or proposals or whatever in either part of those statutes, okay. But I think it kind of the how you how one looks at the the interplay of those two sections or generally how 141a flows through the dgcl. Yeah, that I mean, that's gonna color I think. Where where someone's going to come out on this on this question, whether they agree with me or if they take the contrary position. Yeah. Okay. Oh interesting, right. So okay. So there's those two, There's those two parts of Statute that historically. One receivable bear on this question. Exactly. And I think historically the Delaware courts have in interpreting section 141 a, they've adopted nomenclature such as Delaware subscribes to a board Centric government. Yeah right so I mean and when you hear a term like board Centric and you know, managerial Primacy that that kind of pushes you at least, From the kind of practicing here and and thinking about how boards operate and how how decisions are made. I that pushes us to kind of view 141 a as almost like a gap filler. So it is you have you have all the authority that the, you know, the board has under the code. But on top of that, you know, to the extent, there is the, there's there's silence. A board Center. Government's regime would suggest that that you know in the absence of Express delineation of authority that Authority rests with the board, okay? So the board's concerned in some sense, do what they want here. It's it's the difference, it's the, you know, the theoretical difference or the the debate between directory and shareholder privacy, right? You know, and here we're we're about shareholder Primacy here but we can talk about that in a little while, so on something implications. All right. So keep going. So those are the two parts of statue. So those. Yeah. That bear on this question, I either there are there other parts of the law that you needed to read to kind of get to your conclusion? Yes, so yeah, exactly. That's that's kind of where from there. It's like, well, that that and that tease up the framework for the question, but it doesn't really answer it, right? So then from there looking at Delaware law and shareholder rights. Generally the way courts have articulated those in the past. Are there are three fundamental rights Yeah, this when you buy shares, it confers on you. Three. Three, the ability to do three things. To vote particularly in the election of directors because that is and has been considered the most important. Yeah, that's important subject for your votes but other things, but okay, but voting generally is a right voting generally write the right to sell your share. So the Wall Street rule, if you don't like what's going on, you can watch me walk, you can leave. Yeah, right. And then you have the right to sue. So, Oh those are so. So owning shares gives you as we would say, I've learned the word standing correct. Yeah. You have the right to, you know, you you are owed directly fiduciary duties by the board so if there's a an action that You know I'm not a litigator so the the nuances of direct and derivative claims and when it's a company, that's another podcast. Yeah but when you own the share you get you get you have the right to cut out, to monitor board performance, and to make sure to kind of Influence that through through appreciation. Exactly. So, okay, so vote, sell Sue, vote. Sell Sue. Okay. so I mean those are very, very broad topics and the right to vote, you know, it's The question that is like, well what what do you get to vote on? It says you get to have the right to vote, but what kind of things do you get to vote on, right? And coach and does That right to vote broadly drawn include. Yep. The right of a shareholder. Does it sort of cover or extend to these privately proposal? Exactly. So yeah, they're related question. So right? From the fundamental rights and I guess we'll touch on this first. They're the Delaware courts have acknowledged subsidiary rights and those are rights that flow from, you know, the right to vote and they're related to or, but so Delaware Court, I think over Decades of interpreted it to mean what you're about to talk about. Yeah, what I think, when, I think subsidiary, right? It's, it's essentially, The fundamental right would be meaningless if you couldn't take the action, granted by a subsidiary, right? So you have the right to vote on Direct or elections. That's kind of stupid. If you can't nominate your own sleep. Oh okay, interesting. So So, an extension of the right to vote on directors is the right to nominate directors. Exactly. And you have the right stairs, stockholders have the right to unilaterally amend, the bylaws? That would be stupid. If the only thing they could vote on where by law members. The board says, they're a good idea, right? So the right to vote on a bylaw Amendment indirectly is the right to propose, right? To propose a biological man, which is a big project to mine or a big thing of mine right? Go exactly. so, from there, if you in order for that, you know, the predatory proposal right to be if they It needs to, it needs to flow from the voting, right? So that cut takes you to well. Looking at Delaware's voting rights jurisprudence right to date. Has the court ever acknowledged that stockholders have the the quote right to vote on this type of predatory proposal. That's not brought either, you know, as required by law or by management. Okay. Oh interesting. So now the answer right? Go ahead. Yeah, yeah the answer to that is to date. No, the courts haven't have not acknowledged that. That's a voting. So you so you've looked high and low all through all the cases, whatever, and really and you and others. You know. You're not the first one to think about this. Yeah. And have not really found the Delaware Chancery Court. Considering or taking a position on this on this kind of question. Yes. So the, the closest the Delaware Chancery Court or the Court of Chancery is my living is yell at me if I said that. Okay, as they as they've come is a case in the 1980s involving actually a books and Records inspection demand, where a stock At Chevrons 1987 annual meeting a once stockholder submitted. A 1488 proposal. Yes, on a predatory as a preparatory proposal. You know, requesting the company to cease their angle in drilling. All right. Okay. Sure. Sure. Okay, a separate Stockholder. Saw books and Records to communicate generally about chevron's. You know, they're drilling practices in Angola and about that predatory proposal. So they asked for under Delaware to 20, which we can talk about another day, they demanded books and Records on the subject of this proposal. Yeah, they wanted the stock list to be able to talk to people. Oh, okay. About generally chevron's. My drilling practices in Angola and more specifically a separate purpose was to talk about the proposal, okay sure. All right, go ahead. So one of the arguments that Chevron, you know, caught hard to say how hard they've relied on it, but the company said, well, you know, it's not really something that's proper so that's not. If the, if the predatory proposal is not really a proper matter, then it's not, it's not a proper purpose for you to get a stock list to talk about. Oh interesting. Okay. And so as an initial matter, the court overall just found the. Yeah, the topic of their the companies drilling practices is something that you know, is related to the to the stockholders interests as a stockholder. So it's it is proper that's it's a proper means to get books and Records to talk to other stockholders about just the general business kind of decision. The court did indicted without citations. Say well yeah. And you know, I guess the court you have stockholders, may may want to have a vote on that and there's nothing that's, you know, right? Uncouth about that. Okay. But it didn't, okay but it didn't actually go out and say, okay, they didn't establish the right, that we've been talking about. That's its dicta, it's it's Yeah, it's it's a one sentence, kind of, maybe two sentence throw away. So it's it's definitely, it's, it's support for the contrary view, but it's not controlling Authority and it's one that I address in the paper but I kind of for the high level reasons I just talked about. I don't, I don't view as answering the question. All right. So cool. So that's the Voting Rights though. I think please today. Today they're, they're really three categories or three matters at the court have said yeah. Stockholders have every every right to vote on these. So these are the three. These are three rights that flow from that right to vote. We referred well these are, these are actually just the right to vote. So this is just what the like these are the fundamental, right? You get the right to vote on these things. Oh, these three things. So yeah, so it's right director elections, obviously. Sure it's matters that are committed quote, committed to stop holders for a vote by law or governing document. And law could be the dgcl. Or you know, Federal Regulation or rule to the extent. The company is subject to it. So, okay, to say on page, vote for God Frank. Oh sure. So that that creates that right. Yeah. That's Delaware has nothing to say about that. That's basically, that was handed out from from the exactly. Exactly. Right. And then the last tranche of, you know, voting rights or you know, the categories of things stockholders could vote on are those matters that the board is determined to submit or can be submitted for a stockholder vote. So that's up to the board to decide what they want to hear auditor ratification. Okay. Auditor ratification. You could kind of put like, NASDAQ required votes in there. Those could, you gotta think of those either as exchange listing rules that? Exactly. Okay. You can think of those as either quote committed by law, because, you know, the company is, you know, is subject to those standards or the board has made a determination that we're gonna, we're gonna abide by those standards to have access to the public markets. So interesting. Okay so those are sort of the three subjects for vote. Yeah and the board I think it whether they do it via bylaw. Right or policy or kind of one off a board can make a determination. Not to contest the stockholders, predatory proposal or not to object, right? They could, they could allow whatever they want, but what your point is, you're coming from a different direction, you can't force. You can't raise it over the boards objection. So, the board, Can, you know, include or exclude at once, but a shareholder. If a shareholder will go to Chancellor record a Chancery and sort of litigate this question Chancery would have almost nothing to work with. There's no statute to refer to in very little case law but there's no inherent right. That a shareholder would be trying to kind of enforce if it were trying to contest that board's decision to exclude. It from the from the agenda. Okay. Oh interest. Yeah. Yeah. Whether it's the Court of Chancery in the first instance or if it ends up, it's a supreme court. First kind of like the ca Pro expense reimbursement, by law and ends up there on a certified question first. Yeah, admittedly the court is going to be, they're going to have to they're gonna have to write law. All right, and this is so kind of how I think it should be, how it should be answered. So for those three things importantly, there's nothing specific that says Preparatory. Proposals must be included. That's right. No, interesting. All right. All right. So the paper also, you know, delves into some other aspects of this that I want to make sure we cover because we're going to take a break here in a minute. Now, I want to make sure we cover before we do that. So so there's a strong sentiment at least among these proposers, that there's, there's kind of public policy. Considerations that kind of override all this that the climate stuff for the social justice stuff is just so important. That it just it's it's critical that this be included and and and I think you you address that at least a little bit in in the in the in what you wrote, How would you what did that after say? so, I think that two of the main policy considerations for 1488, Over time and prepare puzzles generally is that they only damn they gave a medium for intra corporate Communications. So for stockholders to talk to each other and for stockholders to talk to management about preferences, okay the other is is holding management accountable. Sure managers making bad decisions or decisions the stockholders. Don't generally support, right? Well, take a reverse order on accountability. It reasonable Minds can disagree, right, but there are there are many more effective ways to hold managers accountable than other than predatory proposal that they can. They can they can just ignore right? Yes, correct. So, it's as accountability measures go. It's pretty weak. It's pretty weak. It's pretty weak. All right. On communication. I think everyone can acknowledge it. It has been a you know a going on. Nearly 100 Year means of of allowing stockholders to communicate on the companies proximity materials about right matters that would be submitted to a vote but 1488 it was adopted in the 1940s. Oh sure. So the amount of regulatory and technological development since then, if you know, have kind of some people think, you know, less 148 in the dust. It's not the it's just not the most efficient or effective means of communication anymore, right? You have Universal proxy, you have withhold campaign. There's other ways for, for shareholders, to do this communication that are that go beyond this. This 500 word limited kind of proposed exactly exempt to patients. There's social media. They're they're a lot of ways that just in that weren't available in the 1940s, honestly, into the 2000s, right? Oh interesting. All right. I have one other. I actually, I want to make a kind of a quick Point here, just to make sure that I can run to understand what's going on here. Because the way I've been thinking about These proposals. Generally, but very specifically after you know, looking at your reasoning. Is that we we need to make a distinction. Between. What shareholders can consider? As part of like a shareholder meeting agenda. And what companies are required to include on the written proxy materials. The two are related, but they're actually distinct. And I think it's fair to say that. Your work on this. Pertains to the first question. Pertains to what companies are required, or not required to just include on the agenda. Forgetting? What goes in the proxy statement? Right. Is that is that a fair distinction? I think. Yeah, it's yeah, it's it's it's exactly that. It's from a state law matter. What matters can be. There were no federal overlay and there were no Advanced Auto, right? Yeah. Right. What matters would be proper for stockholder just stood up at a meeting and said I want to vote on that, right? Exactly. And importantly, the federal part of this Pertains. I think, really only or almost only to the proxy materials. And that indirectly by requiring something of the production materials, it's sort of just defaults to needing to be on the meeting agenda. And you were then asking that very basic question about. Let's talk about the meeting agenda. Yeah, exactly. And yeah, 148 General. Lee has been viewed by, I think, historically, I think they're made though there may be a little bit of debate but by and large as a, you know, a procedural. Grant of authority that allows shareholders to use the company's proxy materials to write just indicated right to communicate. Exactly to solicit proxies on a proposal. They intend to raise it the meeting without paying for their own solicitation. Exactly. Right. And well, actually, we'll talk about that because I have a couple other questions that sort of get to some of the broader implications of all this, now that we've kind of talked about it, but we're going to do that after a quick break here at shareholder Primacy. The Primacy is brought to you by free. Flow corporate directors, their influence and their performance. If you want to Stocker, retirement, plan go to free float. Analytics.com and look up which of your elected directors are performing well and which aren't use your vote in the alternative democracy and get your data at free. Float analytics.com. Now, back to the show, The shoulder Primacy, I'm Mike Levin, we've been talking with Kyle, Pinder of Morris Nichols by chair holder proposals under Delaware law. And I think we talked pretty thoroughly about kind of the foundational law and reasoning for this conclusion that, you know, companies really don't have to include these. under in their, in their Meeting agenda and meeting meeting proceedings. I don't think we forgot anything major there. Right before I get to some, some big questions is that, is that right? I think I kind of, we left out No, I think I don't think so. I think we'll talk about the interplay of 148. I won here. Yeah, the federal, the federal law and so forth. I think. That's right. I do want to ask how you got the idea, what was the kind of the reason you know where this all came from. You know, when you start because you know you're like a practice in lawyer you like have clients you don't write, you know, legal Yeah. Yeah. By trade right. You know and this is actually this is going to I think this is scheduled to be published someplace, right? Yes. I think it'll be published in the Michigan business and entrepreneurial entrepreneurial law review. Sometimes in mid-December I think oh wow. So this number this is happening, man. Yeah, we're in the final site. Checking phase of the peer reviewed. You got three Anonymous reviewers that are kind of looking at over maybe not. So I I'm not sure. I've got I'm through the substance of edit. I don't know if they've if it was peer reviewed or just just for students reviewed. Okay cool. So, but where'd you get the idea? Let's talk about where this came from. So I think that's like for me, probably the one of the more important parts of how this all fits together. The Genesis of the paper is kind of simple. There's uncertainty regarding, you know, the future of the federal shareholder proposal process and Rule 148, right? As as, you know, as everybody knows 148 is the the rule that allows stockholders to submit those proposals for inclusion in the materials or companies proxy materials, right. And The staff or the SEC. I think, you know, they've they've made comments over the course of this year, but starting in early early in the year, a lot of lawyers. And I think Folks at companies and probably proponents, we're speculating that 148 was in for a major reform during the, you know, the administrator, the current SEC Administration, right? And that was After the, you know, the commission. Publicized their red Flex agenda for the role making agenda for the next, you know, for the for this term. One of the I think it was only three or four things on there. One of them was a modernization of rural 148 so that kind of confirmed that 148 was on the Was on the table so to speak, right? To be to be evaluated and reviewed and maybe change or eliminated, who the hell knows that idea that 1488 was in for a, you know, a large overhaul or I guess potential repeal was kind of solidified during the chairman Atkins speech at the Weinberg Center that you all talked about, right? One of his parting words were, you know, I'm also calling for a wholesale reevaluation of rule 148 and whether it it does, you know, it achieves its intended purposes that such as they were when it was adopted in the 1940s. So and this isn't new. I mean there have been Over the over many years different, you know, questions and demands or whatever. Mostly from issuers to, okay? We got to do something about this. Yeah, but it really, it really came. It really got heightened in the past, I'm going to say year. Yeah, exactly. And that kind of from from that with that level on uncertainty, I I started thinking about. Okay, well I'm not quite sure what it's going to look like, but I guarantee no matter no matter what flavor of reform. The SEC pursues, there will be gaps that, you know, either state law or issuers, are going to need to, or maybe, perhaps want to fill, or at least understand exactly. Okay. Oh, interesting. And okay, when when they're a gap, when there are gaps in, you know, effectively in a governance regime. Yeah. Whether it's as the state or the, you know, the corporate chartering architecture or the federal regulatory overlay. Yeah, a lot of issuers fill those gaps by private ordering be a bylaw or Charter provision. Okay. And so you establish the dimensions of what that looks like? Yeah, exactly. So to the extent there's you know, there's either question on the federal rules of you know what? What you can do in your Charter or bylaws to regulate these types of proposals or if they're just were no federal regime anymore, right? What how can, how can a company regulate proposals via private ordering to the extent? It just, you know, it wants to keep that as a means of intra corporate communication. That is Yeah, candidly less intrusive than withhold campaign. Okay. Oh, interesting. So, basically setting their observing all these potential changes at the federal level. You're asking yourself. Okay, where is Delaware fit into this? Yeah, and the charter by law amendments are the most likely Place for a company to kind of because Delaware doesn't legislate top down in terms of here's exactly how you're going to do it and what you're going to do in terms of you know, proxy access and Preparatory proposals, right? So it's a more often than not, I think almost universally. It's, it's a grain of authority to companies to private and shareholders to figure it out, right? Oh interesting. So under the current rules, you know, I started Delaware law The started looking at well. Okay. I guess how could, how could one privately order today if they want is they were so inclined, right? Charter probably the easier discussion because you generally you're you're Charter is your, you know, your preeminent corporate documents that you can. You can deviate from nearly any default role in Delaware, right? Like, If you have, you know, if shares have an inherent right to vote, you know, one vote per share, you can completely divest that in the charter. So if you wanted to die best the right to propose a proposal, right? Put it there, regulations on it, put it there, right? But that's that's great for IPO company or companies with a 75% stock holder, right? Exactly the charter requires shareholder approval. Exactly, it takes two to tango to change the charter, the board and the stockholder I lost different story. You could maybe exactly. Okay. Exactly. So the question was, all right, well, so for you know, Midstream public companies that are already out there Is a, you know, is a bylaw a unilaterally about the bylaw, no matter which constituency it's coming from. Is that is that a would that be a proper bylaw today if you did regulate more than just the time frame for submitting, The Proposal, if you did try to include Yeah and ownership threshold, you you need to own, you know, X dollars, some sort of other procedural thing or whatever. Exactly. Or even like a substantive like yes you can bring governance related proposals but you can't bring the climate ones or something. Exactly. So I mean, all like we'll see where the market goes of on the actual terms of the bylaw, but the threshold question is can you do it by bylaw? You just have so much more flexibility by Charter if there's a fundamental or you know, inherent right to propose. Predatory proposals There's some there's some uncertainty you can do here because you're because you're restricting, right? So literal reading of the statute says you gotta do that in the charter. Some proponent will sue. It issue her over that bylaw and if their laws is as they would like it, they'd they'd win and the company we have to handle it. Oh interesting. Exactly. Because you know, Public companies, you know, it. For you know, Fortune does not favor the Bold when it comes to governance reforms and governance Innovation for public companies, right? So yeah, a company that, you know, what wants to do something like this in the absence of, you know, a Delaware statute or a Delaware case. They're, they're setting themselves up for high likelihood or at least a likelihood of potential litigation. All right. So that's where I, you know, that was that the end of the paper where I said, yeah, this is my view and this is why you can do these bylaws today. Yeah, but to avoid the, you know, the quote First mover problem. It would be if it would be beneficial for the market for the Delaware legislature to say yes you can. In fact, you know, regulate the submission of precatory proposals by bylaw. Okay, interesting. All right. So you were You talked about how we at kind of name checked this whole thing in his in his speech basically saying hey we're really rethinking all this whole precatory proposal deal at the federal level, but that was at the gala, Weinberg Center dinner. And so forth is when he gave the speech you were there. I think, right? Yeah. I was there, I needed. I desperately needed CLA credit because I'm you know, I have to report in December. So I was there for the the Symposium during the day and that I attended the the dinner. So you're at the dinner where this, the chairman of this, she's talking about your paper. Yeah it was, it was, it was both, you know, flattering and humbling at the same time as you know, That's a Delaware lawyer being got. Did you kind of see that coming or were you sort of surprise? So I was, I was surprised that it, you know, that the chair of the SCC took that much notice of my paper to to kind of use it as the least part of his part of his his argument and you know his his call to. I think some people view it as returned 1488 to its roots, right? So you know to look at it as a first, you have to start with state law and then go to 1488, write 148 wasn't meant to do to give just a broad referendum right on environmental and social proposals, of course, right? So that must have been kind of fun, it was. Yeah, it was, it was, it was both cool and horrified, like it's your partners. They're saying they just he just, you know, I got some people looking at me, glowingly, I had some people looking at me like, you know, daggers so what happened? That was the Horizon part of the, you know, seeing some of the the law professors. Look at me with a little bit of disdain, right? So now the other question I have is that about, you know, the whole reaction is so the paper has been out there for at least a couple months. Or whatever. What what if you heard? What kind of feedback have you gotten? What? What if you gotten lots of some brick storage at you or what's the, what's been the reaction here? So both my wife and my homeowners insurance company are both happy that I can report that our Windows have not been bricked or, you know, great or eggs, right? I I've had a lot of conversations with in-house lawyers and you know, public company, advisory lawyers, you know, the big firms to talk to issuers kind of just about the article where, you know, how chairman Atkins framed the question up and what, you know, just the likely next steps could be if someone decides to, you know, to to get an opinion from a Delaware Law, Firm to the extent that issue it, right? And seek to exclude a preparatory proposal on the basis that you know, short hand Preparatory is improper okay. Oh interesting. All right, so there's just go ahead. Yeah. Sorry. So one of the, one of the topics I talked about with these, these lawyers and house Folk. As you is it any predatory proposal? We just gonna see every like every company seek to exclude every predatory proposal on the basis of Kyle's bright idea and I think for the, a lot of the reasons that I I think have been that talked about in some of the blogs and papers and on the speaking circuit to date. Yeah, I don't, I don't anticipate it being a death nail for all Preparatory proposals. two reasons for that is one, you know, there's Yes. You have the SEC saying it's you know, we'll let you exclude it. Yes. You have the support of Kyle's paper that says, you know, it's not proper. Yes. But there's still, there's still always litigation risk and some people just don't want to take litigation risk. on the OHS will not want to take that litigation exactly, whether it's in the form of the certified question or it's, you know, in a later litigation and even if you know the Delaware, Supreme Court and whatever Court looks at this agrees with me. There's always going to the risk of litigation that. Yeah, just because you can in a situation, doesn't mean you always should always well, right? Yeah. So, there's that, there's that kind of litigation risk. Then there's just the, if the company is a too heavy-handed on, let's say a governance proposal, that's about D. Staggering, you know, we requesting these stagger and the company excludes it. Well, what's that investor backlash going to look like at the, you know, the next annual meeting, right? They may, they may be thinking these issues may be thinking down the road that this is an easier way to deal with these questions. Then practice rather hear I'd rather hear about it from a proposal that may or may not pass this year that I can, you know, I have some discretion on how and if to implement as a next year, or something more concrete, right? Like a withhold campaign or something like that are cool. Got like a proxy contest, which that's the kind of a little bit of a nuclear option, but that's those are the kind of the Judgment calls. I think, companies are thinking through, and being a little bit more judicious with the The possibility of excluding a predatory proposal under 148 i1, and I do think the SEC was thinking along those same lines when chairman Atkins gave his speech because he I mean he did Focus. He did focus on the environmental and social proposal, right? That I mean he quoted some data that historically, they don't get as much support. They don't, they don't pass nearly as often. Its governance proposals, right? And they, I mean, they, they are, the, they are the proposals that get the most, you know, heat from the most opposition. And even the sec's kind of been over time, you know, when they were looking at proposals not on the, the broader, are they just generally predatory proper? But they were looking at it in terms of more of proposal by proposal basis. One of the main ways, you get an environmental or climate change. Proposal out is to say it relates to our ordinary business. Oh, that's mainly to exclusive, yes, right, exactly, yes. So there's a Real 148 i7 allows a company to exclude, a proposal relates to ordinary business. There's an exception that if it, if you know, if it involves a significant policy matter, right? Then it's not, it will not be ordinary business. And the SEC has the guidance on, you know, what's ordinary business and what's how to apply the significant policy? Exception has been going all over the place. So it's, yeah, even, you know, I think this is all. So a an acknowledgment that the SEC doesn't want to be the mediator for figuring out or very business and right, yeah, right. So what what, you know, a social policy is that it's gonna eventually to the extent, it falls to Delaware, Delaware doesn't have a whole lot of guidance either based on what we've heard from from this research. So if you've gotten presumably you've gotten some criticism. Some some, you know, is there is there a way to sort of summarize? What how people have objected to your findings? Or is that, isn't it? Is it too early? It's a little early. I think a lot of the objections haven't been necessary to the findings since just, you know, The the potential that rule 1488 may not be available as available. So I think, if I had to it was, the end of last week or sometime last week, I, I saw a blog post or like an open letter to the SEC talking about my, My article or the draft article and I think the biggest piece of criticism or disagreement is that? Just because Delaware law is silent, doesn't mean it's not allowed and 211 B is very broad. Oh, so it's kind of that how it's kind of like it's that framework. Question. I I started with which is where do you start from? Is it do you start from a place of board Center governance and directory or shareholder privacy? Got it. Oh, it's the latter then. Yeah I imagine that's that is how a court would probably. Probably come out, which is yeah but if it's because I mean Delaware law today. At least has been more board Century. So kind of reading the T is for how the courts have Have deferred to manage management and certain situations in many situations, right? I think based on that, that's why I think my, my framework is that is the better way to think of it in undercurrent Delaware, law, got it. All right, cool. Hey, we're running out of time, but I have a couple other quick questions that are only barely related. So I wanted to know, I mean, again, you don't write papers for a living, you you deal with clients for a living, right? So your law practice at Morris Nichols, but you're you just said a little while ago, you don't really go to Chancery Court, right? You're just? Yeah, yeah, I I think I've been a former Delaware jurist referred to what I do and people like me as being a telephone lawyer. Oh, he just, yeah. We had with our main role as, you know, advisory in counseling. So you sit at the desk and sort of help people write by laws. Help, people, interpret statutes and so forth. But you're not. Exactly. And then I'll do that. I do some transactional work on. So you know some I held out with public company m&a and things like. So you'll do deal. And so forth but you're not you don't actually go to Chancery Court to litigate this stuff. You have partners for that purpose, correct? Yeah to the extent that comes up. I'll be in the background making sure. You know, it's the the train stays on the tracks but yeah you won't see me in court. Cool. All right and then you've been at Morris Nichols for your whole career went tell me a little more but some of the origins of all this. Yeah so I've been at Morris Nichols. I started just over 10 years ago at the end of the summer. In 2015, I I was a summer associate at Morris Nichols and I'm a lifelong Delaware and so it made sense to stay home and stay with stay, stay near my roots. And, yeah, I always found corporate law. Interesting, we had family friends, who were prominent corporate lawyers, so it's interesting. So you went into the state, you went into the state business. Exactly, exactly. You were in a chicken farmer. So you just decided to go into into corporate law. Exactly. And I, at the time it was, but it was soon to be my fiancee. Now, now wife and mother of my two kids. Yeah. She's, she's also a native Delaware and she is very much of I refer to her and myself too as a country mice. Meaning, we don't want it. We don't necessarily what I'm going to be living in a in the bustling Metropolis of New York or DC. So, there's one to good combo. There's plenty to do in terms of what you chose in Wilmington. That's plenty, exactly. So, all right, well, this is great, this is wonderful. So I think we're gonna have to, we're gonna have to wrap up here. I hope, I hope you've enjoyed. Sort of explaining what you had in mind here and sort of figuring out what's next. Probably there's some bylaws to write and there's some more litigation to look at and so forth. As we, as we, as we work through this, is that song, right? That's sounds right. I think, at least, for me my next Project will be just trying to figure out what that, what that type of predatory proposal bylaw looks like that. Both, you know, achieves the goal I'd like but has the the compromise effect of making everybody a little unhappy and happy at the same time. Exactly. Right. Cool. Well we're going to wrap up then, as we said, Kyle has been great talking to you about your older proposals and Delaware on these other subjects. This is shareholder Primacy hosted by Ann Lipton and me Mike Levin. I'm an independent activist investor and advisor to investors about their activist situations. I've been talking to Kyle Pinder who was a partner attorney and partner at Morris Nichols, arched and tunnel. They say that right title tunnel tunnel in Wilmington. Delaware, you can find me Mike at the activist investor.com and you can find Kyle at Morris Nichols. One word, Morris nichols.com. Our podcast is produced and distributed by free float media. Thanks for listening. We will talk again soon.