Earnout disputes, proxy advisors

Welcome to shareholder Primacy from free flow media podcast about activist investing security slaw and all the ways, the financial and legal worlds intersect and Collide in real actual life. I'm here with fan lift in law, professor at Tulane, New Orleans teaches researchers, Securities business law. You've heard it all before but it's worth reminding ourselves. She holds up the legal end of our podcast. Mike Levin. Actually, I try this week, two subjects that an and I talked about first, there's earn outs which we can discuss in mergers earn outs related to one company buying another or being acquired by another. And there's evidently a case before the Delaware Supreme Court. Not even Chancery Court that shed some light about earn outs and how they work and how screwed up, they can get I guess. Yeah, and we'll look at an interesting and potentially significant announcement of sorts from proxy advisor, glass, Lewis. Yes, sir or what? They announced and walked back basically, or maybe didn't walk back anyway. So let's before we do that, we want to remind everybody. Don't we, and about our new shiny email address shareholder Primacy one, word at free. Float one word dot LLC shareholder Primacy, a free, throw that LLC, where you can complain, you can give us ideas, but most of most of all we want questions, we want to know what you want to hear. And if you have some questions, we already got one. Did you say and we someone already sent us some questions. So, and they're and they're pretty good. So, once we get certificate, Well we'll do a show, we'll do a Q&A show or mail bag show or whatever we want. But we're gonna keep we're going to keep reminding people until we get enough. We're gonna We're not gonna stop until we we get a bunch of but I want to I'm too earn outs. Let's talk about disputes over earn outs and so forth. But before we get there there's some people I'm from familiar with her not because I have been subject to them and I've looked at them. Um so I kind of know what they look like but maybe for the rest of the world or for others. What are we talking about when we refer to an urn out? Selling stockholders the target, well, receive additional payments after the merger is completed based on how the target performs in the future. So the idea is something like a choir wants to buy a Target, they're trying to settle on the right price. For the stock, the target thinks this company has an amazing future sales are going to go through the roof. Therefore you should pay me a very high price for those future sales and the acquire thinks, but I am not a certain that those sales will actually be worth coming. I think there's a lot more risk and I don't want to pay for these Futures sales that may never materialized. So, you bridge, the gap with an urn out, the buyer pays some amount to the selling shareholders right now, but then everyone waits to see how the company performs after the merger. And if sales are indeed High, the buyer pays more. If the sales are low, the buyer doesn't pay. So, it is not just it's not just sales, there can earn outs can be based on all sorts of other programmers, say, sales, profits units, all sorts of other stuffs, which is exactly but it's basically a contingent. So some of the sale price is paid Contingently depending on how the target does. Right. And and, and the economy wants to remind people that this deals with an interesting problem that we call information asymmetry. Well, sure. Okay, sure control too. But yes, but there's the sellers know stuff. That the buyers that they may or may not hold the buyers or whatever. So anyway all right, so that's that's sort of when we refer to turn out. That's what we're talking about. And why do we care? Why are they there? Well, you've seen more of these are what? Yeah, they're much more popular recently and that's largely because we had this boom period. We might call it companies that these really high evaluations because it's, you know, discounted cash flow analysis or whatever with a higher interest rate environment, the private company doesn't look bad valuable, but the private company investors, they got used to these really high evaluations and they don't want to give it up for a lower valuation. They don't want to take a hit even if it's Your paper hit. So the only way to bridge the gap is and urn it. All right, so, so when interest rates were comfortably attractive, there was less interest in these because, you know, the economics, kind of, you know, it didn't require. those kind of payouts, but now that interest rate, kind of gap between how those are valuing things versus how the private company invest. Right. So We'll, we'll be because we have to kind of pay more whatever because of the interest rate we're going to pay at least some of that contingent it sounds like. And that's become a little more popular in the past. Probably two, two, three years. I'm going to say and there's probably data on this somewhere. but about you, Right. All right, cool. So earn outs we know what they are and we know that they've grown in prevalence lately. And yeah, I've seen him and so forth, you know, again, I don't get involved too much in like m&a stuff, that's some company. As I look at do and yeah, there's going to be, you know, kind of healthy healthy gifts, giving to CEOs and so forth or you know, whatever salary, you know, public companies, buying a private company. There's going to be there's going to be these kind of additional payments. It could be and it could be stack, it could be all sorts of stuff. That gets that gets awarded. So yeah. I've seen it so and and in my kind of very limited experience, these are like ripe for abuse, okay? There is so much they are so I mean, a smart buyers. Gonna try to put a lot of boundaries around it, but man, he could get games so well, but they gave him. Well, there's a lot of litigation Yes. Okay. There's been a lot. Because the whole point here is that the urn outs are based on the targets performance after the acquisition. And at that point the acquirer is in charge of the company and the choir wants to minimize the urine out payments. The acquires operating under this conflict of interest, they want. Oh interesting. Oh, so hence your comment a moment ago about control over this, okay? Role. Like so if the issue was profits or whatever. Well, the acquirer is the one who's in charge of getting those. So they want their acquisition to do well, but they also don't want to pay for the urn out so they just want they just want the sellers to kind of go away. Yeah. Right. Is that the acquirer kind of manipulates how they were in the Target companies so that they can minimize the urn out payments? And that means Delaware has just been absolutely flooded with earn out. Litigation the selling shareholders, alleged the acquire, or breach the merger contract. In order to find some way to reduce the urinal pain. And the acquirers is no, we didn't. The Target just underperform there was something we can do. Oh, I have to tell you, I love these disputes. I mean just intellectually sitting here. Oh, they're probably they're probably some really delicious details and some sorts of principles. when the right to find ways to, Match. So yeah, so and you and you and and you spend a lot of your time reading and you really opinions and stuff. And and you read too much of this in a week or a month and you're and you're just you're starting to get a little your eyes glazed but I'm I could just see you sort of sitting your desk saying oh wow good or not. Litigation this one. I'm Gonna Save this one. I'm Gonna Save this one for the weekend. As well, they've got colorful pack better because like one problem that comes up all the time is timing. So most earnouts have a time limit selling shareholders will get additional payments but only if operational goals are achieved in some number of years. So that's just Aroma a roadmap for the acquired a slow walk future earnings opportunities. So so we're gonna load, we're gonna load all these great results into the month after the aeronaut expired. That's exactly what happened. Contracts are signed right after the burnout period. Expires expenses are front loaded, so that is an accounting matter. There are losses during the year and out period and profits right after it. Drugs in development, this keeps happening. There's a constantly happens there's an urn out payment due. If you get FDA approval within some time period and magically FDA approval, comes just after the period expires. Imagine Dragons with genzyme. There's been a running for Is forever. Involve it like several different cases. Actually involving Bristol Myers as acquisition of cell genes. Same scenario in Bristol Myers case they missed the regulatory deadline by 36 days. So I mean and when in regulatory development which is counted in decades, yeah it's like tiny. That's nothing targets know. This is a risk and they'll try to constrain the acquirer in the Contract, it'll say. Say stuffer, or they'll even put specific operational requirements in the contract. Like, you have to operate the business and such and such manner. Oh, and that's just ends up with more hilarity. So one of my favorite, this was litigated in Delaware, forever. It was a case called Schneider National Carriers. So Schneider I've seen. Okay, go ahead, I think I've seen that caption, okay? Schneider is the shipping and freight company. It's you see their trucks, their trucks and they acquired a trucking company called w&s and there was an urn out where there would be additional payments to the selling stockholders. If after the acquisition wns hit certain profit Milestones over the next nine years and profit profit it was so if it's okay, yeah. Exactly if they made those then there would be more or now payments, but only if they hit certain numbers and Schneider all. So promised in the contract that every three years for the next nine years, it would cause w&s to acquire 60 more tractors. Now, I mean, I mean, just think about it. Why did wns want the promise that Schneider was going to acquire six? Interesting? Okay, well, I mean to me, the obvious reason that they wanted Schneider to acquire 60 tractors. Every three years was to increase his hauling capacity. This is a trucking business, the more tractors it had. The more business it could do. So among other things, wns, Schneider, promise it would buy more tractors. Basically invest, more Capital, put more Capital One and Schneider did in fact, by 60 tractors. So they that cause that paragraph, they complied. They also retired more attractive with fewer tractors than when they started. And of course, they didn't meet the profit Target. So the set so, right? Because they're because they could, I mean, they could, they couldn't work because there's rules about how much you can drive and they couldn't operate their Fleet in a way that was able to meet this ebitda. Wow. Okay. Wow, the question for the Court, when this came and litigation was, did the contract mean that Schneider had to actually increase the total number of tractors or was it enough to Simply buy 60, new tractors? No matter how many it took out of commission, sellers lawyers needed to understand the difference between net and gross. Exactly. To be added if they thought there were no limits on how many you could retire. I mean 60 additional ones are meaningless. If you have no idea, how many you're losing at the time of the acquisition wns had several hundred tractors. According to Schneider, they could have retired every single one of those tractors and acquired 16, new ones and that would be what I mean. I mean, Schneider would have kind of killed his business. The idea was it's meaningless. No one would ask for 60 tractors. Exactly to grow if you had no idea how many you were gonna write, but the court said, the contractual languages ambiguous and this got litigated Forever Until It in Delaware is Delaware. And there was an allergen case where Allegheny acquired a company that made a device for people with dry eyes. And there was supposed to be an earn-out payment if the FDA approved this device for the treatment of it at least one, dry eye disease, symptoms and the FDA did approve, the device but to improve dry eye symptoms. They said it was to improve dry eye symptoms and Allegan argued. I swear to God that treatment of dry. Eye is not the same thing. There's two, there's two different in the meaning of those. Two verbs. Exactly. Improve Exactly improved know, treat and improve the treatment. Has Improvement of a symptom, and therefore didn't know any Milestone payments, anyway, the former stockholder suit and ultimately, the whole thing settled because that was just silly. Cool. All right so so and that I think there was a more recent case that you wanted to kind of talk about. Okay guys. Port has one pending right now, although this one's not nearly as weird ridiculous but it's it's a serious one. So J and J acquired a private company called Johnson & Johnson, Medical, okay. So they required a company called Oris Health, that needs surgical robots and it promised this time again earn out payments were tied to FDA approval of different procedures. The robot could perform and the selling shareholders, basically alleged that instead of prioritizing the development of the robots, so that it could get FDA approval. Jay and Jack prioritized, its other business interests and kind of cannibalized, the robot, so, starved, starved, this acquisition of their business holistically. And they didn't think that there was A prioritized. Shareholders won a trial, Delaware transfer trials, eventually trial before. Yeah, well, she concluded that the contract required J&J to prioritize this robot and J&J is arguing, the Chancery misread the contract and it was permitted to take this broader view of its business interests. One de this is really fact, specific depends on the precise language of the contract, but there was one aspect. Just interesting contract dispute that. I think it's worth talking about. Um so the idea here is all of these earn out, payments were pegged to getting FDA approval of the of this robot to perform different procedures. The first one was for general surgery and then there was one for other procedures like abdom Abdominal lower abdominal like that. And when you're seeking FDA approval for a device, there are different Pathways to get approval. And if you can show that your device is similar to one, that's already been approved. It's in a previous, it's a faster, it's called 510k, so it's easier to start. It's easier to get this five, ten K approval than it is to start from scratch. Well, when this merger agreement was reached everyone, everyone was absolutely positive. That all of the new approvals could use this five 10K could use the based on shortcut. Yeah. Could use a shortcut based on a previous thing that this health company had approved, they were so sure that the 510 Cathay pathway would be available. But they actually explicitly said the Milestones were for achieving FDA approval through the 510, K pathway in the contract that was in the contract. Like nobody had any doubt that the five 10K pathway was going to be available and then the FDA said, no, you can't get five. Ten K approval for the first one. The general surgery one you need. Need to start from scratch. Now what there's also no dispute is if they got General, like regular approval for that first procedure, the general surgery one, they could use that to get five, that would be their five 10K path. Exactly for the other ones, but the first one was gonna take this, you know, go to get to know, it takes years, it adds so much. I mean, the five ten K is like really it's really fast. But um, so this was totally unanticipated by either parties. So the question is, what do you do with that and J&J's argument? Was they have no obligation. That was it. They promised to see approval under five 10K. They couldn't get it. Under five 10K, the dog, we're done. So what advice or will found is that both parties had a duty of good faith on this contract and anyone acting in good faith. Wouldn't say, oh, no, five 10K process, we're done here. If you're acting in good faith, you look and you see if the alternative procedure starting from scratch. If that's feasible, if it's commercial reasonable and she concluded, yes, it was. Because even that more longer pathway in this particular case would actually have only Another couple months to the timeline. So she concluded that J&J had a good faith obligation to try to see the regular approval for the first device. And of course, once it got that the other ones, it had an obligation to seek 510k approval for the other ones and it could have built it on that and it could have done that on that, build it on that first one and Jane. Hey, of course, is like, no, we all anticipated. There would just be, this was just gonna be five. Ten, K forget it. So, alright. So, this is a really interesting question of contract, interpretations, part of the case, and the argued in the summer, and we'll find out. Oh, so Chancellor will ruled in favor of J&J and no favorite favorite of the seller. Yeah. And and Jane J appealed, and JJ appealed. And they tried to get amicus briefs on their side from these, honors and the Hillary Clinton refused to let them file, the hamburgers, which is just a funny little Oh he said it was. Wow and unnecessary. So they don't get any Amicus which? Yeah. So I think I just figured out you have a new hobby just like I have a hobby. Tracking Universal, proxy card voting outcomes. I think you have a hobby of trekking outs Um, yes I I do. I think that's it. Tracker. Now I I read the internet. Cases. And so it's good. Like I said the version Some people, some people knit, my wife nits. Other people tracking cards are not cases? Yeah, wow. Well let's let's let's ponder that over the break. For a moment and then we'll come back and talk about proxy advisors and class Lewis and their announcement. This last week or two here, it's your older Primacy. Shareholder Primacy is brought to you by free float and lyrics.com the only free database of corporate directors their influence and their performance. If you own a 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, welcome back to shareholder. Lipton here with Mike Levin and we're going to talk about glass Lewis. I'm like, tell us what we saw with glass, Okay. So You know, glass Lewis, you know there's proxy advisor and we're going to dig into that in a minute. You know, they're kind of the the Avis to issa's hurts. You know, there's only two companies that compete really. You know, there's a third Eagan jobs, but they don't really matter. I'm sorry. Egan and so, glass Lewis had a very kind of curious set of announcements in the past week or so, there was some reporting. That they were going to completely change their business around, they were going to get out of the sum of some aspects of the proxy advisory business. And there's a I don't know if you follow some of for the new, there's a sort of yes. So you know, newer news Outlet, we really good business reporting so they had a news item. That was something exactly that. They plan to stop. Providing or recommending or whatever, based on what some of her called its house View. On items that are on the AGM. And so there was some some attention to that. What are they going to be doing and so forth? We'll talk about what that kind of means, they then kind of walked back that. So a senior executive at glass Lewis gave an interview to the deal, which is, you know, a little more, the business Publications that are. No we're not. We still going to have a house View. Um, and then later on semaphore. So Liz Hoffman is pretty. Sharp Liz Hoffman said, I have receipts. I tried to shoot the story and she, right, they tried to and deny the story, but sort of, soften it for reasons. We'll talk about in a minute and so semaphore, then quite uncharacteristically released, the internal glass Lewis memo That semaphore had based their original report on saying no, no. Looks like they're gonna be maybe kind of change the house to you a little bit, so that that led to all sorts of fun thinking in meditation about, you know, what, what's kind of going on here. So, yeah, so that was That was that was kind of interesting and it got me thinking and you and we talked about this little bit about, you know, kind of what this is involved. What, what the hell is a house view? Okay. So yes, I think they offer different Services, right? So yes, correct. So, let's kind of, let's kind of break down a little bit of what, what approxi advisor kind of does. and there's there's really kind of Three aspects to their service offering. The original one was just research, you know, as as the number anywhere going back decades is the number of items on an AGM, you know, sort of increase shareholders, founded convenient to learn to hire. Someone to learn about these. And they started hiring ISS and glass Lewis, got started a little later to do all the research part of the asset that you control, right? So you need to do, do diligence into these. And so, instead of, you know, reading all these yourself, you could hire ISS and glass Lewis to kind of do all the research into Source. Summarize, you know, what is this climate proposal or what do we think of this directors, you know, say on pay which we're going to talk about a minute became, you know, got to be a huge issue. For them to try to really understand and vote these proxies responsibly, okay? but then, They took it a step for their and said, in addition is doing the research, they started rendering recommendations, we think that clients ought to vote this way. On one or another item. Okay, that we we think that this company's directors need to be rejected or we think that this company's Policies about political contributions are wrong and need to be opposed. They started affirmatively telling its their Institutional Investor clients, kind of how to vote. And so that is sort of emblematic of the house View. All right, there's actually a third service line which I always found really interesting and kind of useful, which is the actual processing of the vote. All right. And again, people, you know who hang around, you know, agms and proxy contests on a real familiar with this. But, you know, i s s in class Lewis have this extensive back off office service where if you know, some fund or some pension fund says, you know, I want to vote everything, you know, certain way. I s s in glass or in our class lowest. Well, actually do the processing. Yeah. Like a platform that they can use, yes. And they can sort of track it. And, and a lot of these funds have reporting obligations about how they voted. So ISS and glass, Louisville support, you know, that through the processing, there's those kind of three aspects of This research The advice and the processing and what literally, and the house view, informs that advice that middle. Component of this. Because, you know, glass Lewis is going to say, we think you Oughta, you know, oppose all directors that lost to say on pay vote. I'm just making this up, okay? You know, in the past year and they sort of have this kind of perspective, you know, you know, some people might call it a bias. About how you need to vote. And so that has gotten glass fluids and I assess as well, Intel, lots of hot water, okay? The idea that they have this perspective that they have these kind of and it's worth noting that they render these this advice. A lot of the time with respect to sort of a set of policies. To say, you need to oppose this director because they lost to say on pay vote and didn't do anything about it. That has its basis in a policy. Yeah, no idea. They are much stricter about. Individual. Yeah, exactly. Company will say, Director X is independent and glasses will be like, I don't think maybe not. Yeah, right. Yeah. So um, so so what literally glass Lewis was doing with this memo that semaphore had sort of leaked was they said we want to Do less of the actual advising about how to vote. About what you should you know, should you approve this directors? Should you approve this PayPal package and more about what kind of policies and investors should have So you know investors, you know, bigger ones or whatever, you know, they don't sometimes, they don't know what kind of policy to adopt. They don't know whether it makes sense to always post directors, that, you know, are not on sufficiently diverse boards, or whatever. There's all sorts of room for policy. So they wanted to kind of get into the Consulting business about which policies. And investors should adopt and less about how they should vote on individual matters. Yeah. And it actually like and this is part of their custom business. Yes, yeah, yes, correct. All the custom advice which Is what they call a customer. But yeah, it's like The client develops for in. Consultants or not like their own set of policies in response to how the vote. And the Muslims could put it in their platform. We will evacuate your voting policies, so they want to. Yes. And then and then that processing business then just acts on it, right? Right. Exactly. So, so they, so the they really want to start to de-emphasize the actual giving of the advice about how to vote and more about policies. But then that leads to a more interesting. Question is why You know, you know, the advice, you know how to vote is, you know, I SS and glass made a lot of money doing that, and sure it's kinda developing custom costs. More maybe, there's no more I can. But you don't have to do that every year. Okay, you know, in this advising business. There's some there's some recurring revenue and giving advice every year, You know just kind of doing the policy check up, you're not going to make as much money doing that. You know there's going to be some big policy project for someone but okay so And it got it led to an interesting little look at the subjects of what the advice is around. And there's sort of four areas, very generally that the proxy advisors kind of tell investor clients, you know, how to vote. You know, the one that always gets a lot of attention, is sort of a proxy contests. And okay, you know, and just just last week, you know, glass Lewis was, you know, telling clients to vote a certain way and Harley Davidson and I asked kind of was going to tell him to vote a different way. And those always get really, you know, really high profile You know, you know it every proxy contest. Everyone's always waiting eagerly for how I assess and glass was going to tell people to vote, but the problem is that there's very few of these in a year. you know, though it would advise on like whether to approve a merger, Frequently. But, you know, most most CEOs, most, you know, management teams, you know, they're not going to encounter ISS and glass Lewis, you know, that often during their career and these kind of situations because there's so few of them, okay? The next year that they give a lot of advice. On is how to vote on ESG proposal. Okay. Should we you know, should this manufacturer of, you know, have this climate should the shareholders approve, this climate disclosure should you know, this kind of governance proposal get approve this company and so there's just, you know, there's a ton of these ESG proposals in a year though. There's it's worth noting. There's many fewer significantly fewer like in the last year or so then in previous years. But, you know, realistically, you know, boards and Executives and so forth, you know, they kind of view it as a little bit of a nuisance. But, you know, it's it's not enough to like You know, get major lobbying firms to like convene Congressional hearings. So this announcement was coincident with one of those, go ahead. I'm sorry. Yeah, but that was, that was a, that was a big problem. I mean, that was, you know, for what it's symbolized but you know, there's there's because these people were starting to, you know, really bug, you know, I don't think necessarily so you know bug exercise about it. But, you know, the issue proposals is not necessarily going to be a principal source of Heartache for glass Lewis. Here, you know, companies kind of like, you know, get a little nutty about it but it's not that big a deal. We get to two other areas first every year, you know, glass Lewis and I assess recommend how their investor clients should vote on directors. And every year they're going to say yea or nay up or down on the whole Slater, whatever. And again part of the problem is that, you know, most director elections. So few proxy contest most directors are unchallenged and most directors. Kind of sail through, you know, class Lewis might oppose some directors and so forth and their, their opposition has kind of ramped up or kind of nudged up over the over the years, but still, you know, directors still win, you know, well over 90% approval and so forth. So, It's usually good. The last year is really hits CEOs where they live, which is exact time, okay? Since the Advent of say, on pay IAS in class Lewis almost every year are telling shareholders, whether or not to approve. The executive pay package. All right, and, and this understandably makes CEOs a little nervous. So if I SS and and there's there's a ton of research, this goes to the research part of this, you know, investors don't really know how to read this stuff. You know, the executive pay stuff for really how to approve it and so forth. So I assess and glass Lewis for years have now been telling shareholders what to think of executive pay and Executives. You know, kind of push back on that. All right. And and if and the say on pay vote is, you know, strictly speaking advisory, but, you know, if it kind of goes south and the Shareholders reject, you know, less than a majority, approve it. And then the board doesn't like respond properly. They're going to maybe get an adverse director recommendation and that's going to lead to more heartache. So this this is where glass Lewis gets into a lot of trouble. And so I could easily see a path where they'd say, we want to stop advice and clients about hey and get them to more advise him about the policies about pay, I guess. and I think it's also like, I mean, here's the thing about ESG like, I I think, you know, most Of their predatory companies, don't write. They obviously don't like them very much, but I think also a lot of noise is made about ESG to politicize it because they're concerned about the other things. But it's easier for like the house to do a hearing about how dare they be advocate for local liberal policies cartel, right? It is for them to say, well actually, we're concerned that That they're against the CEO pay. So like ESG becomes the wedge to try to argue that. All the recommendations are bad. Yeah, sure. Yes, absolutely. And then that has happened over the years. So anyway, so this is some of the context between this sort of structure of the services and the subjects kind of helps develop a little bit of understanding about why. Glass Lewis might want to make this fundamental change. They again, they walked it back. You know, the idea here is that instead of ending their house view like abruptly, they're going to try to emphasize the policy advising. View of this and you like kind of over time and basically let clients start to make some of their own decisions about how to vote on an individual, you know, a specific manner. Um, but you know, it's it's interesting because it's it's another sign of the proxy advisors, you know, trying to escape or avoid, you know, too much scrutiny and just basically do their their business which is, you know, pretty profitable. You know there's a related subject about how they're going to be regulated. You know, this was go ahead. Yeah no I mean that's exactly the thing that like okay so one of the yeah, the SEC and keeps trying to like or, you know, under Republican administrations proxy advisors They're just, they just don't like shareholders. Yeah. Having this kind of voice and I SS and glasses been very effective. So, okay, so but here's the thing. so, when the SEC under the first Trump Administration went for proxy. Biden Administration. There was a question and we talked about this before whether proxy advice even is a solicit. It's the SEC can only regulate it if it counts as a proxy solicitation, right? So the sec's view was these recommendations are proxy solicitations and that's why we can regulate it. But one of the other issues is what if they don't have a house view. If all they're doing is developing these custom voting policies that Implement like the clients own preferences on their processing platform. Does that count as a proxy advice that the, you know, SEC was interpreting as a solicitation and the SEC in the first job Administration said, yes. Even if all you're doing, is developing these custom policies so that the client votes, according to their own policy, right? As a solicitation and therefore we can regulate it and my view. And if you just said, is that what companies are really objecting to is shareholder power at all? I don't think they're going to be happy even with the like I don't think this is this change, getting rid of the house. He was going to take them out of the Line of fire. It's because the problem isn't the view. The problem is making it easy for shareholders to express. Exactly, right? So, but we said this question of whether proxy advice, even counts as a soul, Is what the SEC could regulate that is pending currently. There's it's still it's still wrapped up in litigation and it turns out there was oral argument. And the reports say that at oral argument, the judges were very skeptical that proxy. Advice counts as solicitation And remember in proxy advice is not any proxy advice, right? If advice is not a solicitation the SEC. It's not can't regulate it. I mean if Congress passes a new law that I can but for now if it's not solicitation under existing laws, the SEC can't regulate it. And it look like the DC. Circuit was pretty skeptical. That it counts as solicitation. so, we'll see like, you know, Right. So, I mean, but there's other there's other sources of pressure here, you know, regular regulatory is a huge one, right? I mean, I could see, I could just seeing, you know, well, investigate them and there's trust violations. I mean, there are other sources of pressure, no question, but one of the big ones that's been the SEC saying, this is a solicitation and therefore, we can regulate it. Right. Well, so so we'll have to I mean, we'll obviously talk about this a lot more because the proxy, it's this High season where the proxy advisors are coming out with their stuff but yeah it was it struck me as a really interesting potential switch, you know, for setting aside, you know the the news newsworthiness of it, you know, for them to want to become just an advisor about policies and not about how to vote. Is, if it's a fairly significant significant, you have like the headline, now, whatever. There's any kind of issue, like, you see? Like the heads, whatever you wouldn't see that anymore? No. Right. Exactly. You're just see shareholders, you know, potentially, you know, and they, they don't, you know, there's others who want shareholders to start to, you know, because institutions at hi. This is how we're planting and voting in this and they're not going to do it, you know, nourish the big Norwegian Sovereign wealth fund, they disclose some of their votes in advance but they're pretty unique. Yeah, a lot of the a lot of them do sometimes. All right. Cool. I think I think we've probably That beat this one to death too, but let's return to it at some point soon but but for now I think we can we can leave it right there, how's that? Sound all right cool. This is shareholder, Primacy hosted by and Lipton and me Mike Levin. I'm an independent activist investor and advisor to investors about their activist situations, and is the Michael M. Fleischman professor in business law and Entrepreneurship at Tulane law school. And in Philadelphia tools Murphy Institute, you can find me Mike at the activist investor.com and and at lawn.edu our podcast is produced in distributed. By freefloat media, thanks for listening. We will talk again very soon.