Corporate control and director say-on-pay

Welcome to shareholder Primacy from freefloat media, podcast about activist investing Securities Law, and all the ways, the financial and legal worlds, intersect and Collide in real life. I'm here with an Lipton as we all know law. Professor at Tulane in New Orleans who teaches and researches Securities and business laws. She holds up the legal end of the podcast and that's Mike Levin an activist investor who lives and works in Chicago. He covers the financial side of our podcast. Well, thanks, how are you doing this weekend? Doing pretty well a lot about the election. Yes, me too. But and we missed you last week, you were traveling you at a conference. Yeah. And I think this week, I think you told me, you were grading papers. Is that right? Is that still right or no, no, no. I've just I've got more conferences coming up. I Got more conference is. All right, so little more travel. All right, cool. Let's let's figure out what we want to talk about today. We will talk about the interesting and somewhat subtle subject of who controls a company or a corporation and sort of the legal Nuance that that works there. And we'll take one more. Look at director say on pay? Yes. All right, let's let's talk about control. and, We could spend probably several entire podcast talking about control. It's it's it's it's a, a very rich subject Lyle on Delaware and other places and so forth and it's very relevant to folks like me. about because we want to know who's controlling and how they're exercising that, but we really want to focus on some of the legal Aspects of it and it runs through, you know, there's there's vast squads of corporate law in Delaware and other places where control is, you know, relevant or probably the central question. And there's some recent developments too that Kind of advanced what it means for an investor. Or an executive or a director to exercise control over a company. So let's explore that a little bit, and sort of, you know, figure out, you know, what some of those advancements. Kind of mean day-to-day. But let's, let's begin with some of the grounding, some of the traditional, like sort of definition or meaning of control. Yeah. Um well there are different definitions of control in general. You're considered a controller or controlling stockholder if you have more than 50% of the voting power of a company and that can include either a single investor or group of investors who work together. They'll be joint controllers, that's what we call hard control. You have more than 50% of the boat, right? But even if you control those votes, you call the shots. But without 50% of the voting power, you can have soft control, meaning, you're considered a controller. If you can be shown to have a combination of voting and managerial power that in Practical effect, gives you control overboard functioning and control overboard. Functioning can either be shown generally, like all you know just sort of how the company runs or it can be transaction specific. Like maybe you're not a controller all the time and for all purposes but you exercise sufficient control over the board for one particular decision and you're considered a controller for that transaction, only, but the test for soft control, depends on all facts and circumstances so it can be very indeterminate. You look at personal relationships between the punitive control or and board members or bullying even by the computer to control fully like they call up the directors and say I'm going to sue you, you can look to whether the punitive controller has contractual relationships with the firm or governance rights like blocking rights or the right to designate board members, even another role in the company, like being a CEO, might contribute to Finding of controller status. If it means that person exercises outside of influence in the boardroom. All right, so there's there's these kind of two aspects, there's really as you said and I actually wasn't familiar with the idea of at least the terms of art between hard and soft control. Hard means you got to votes and that would be literal, you know, Common you associate with common shares or kind of de facto or practical control. Without in fact having those votes and we'll call that soft control, right? And that could be situation specific. It could be with respect to one another aspect of corporate Life as a post to like, overall, you know. Yeah. Control over. Yeah. Usually that's how it sounds like either. You have control over the company. Generally some way or given the particular circumstances, you exercise control in one particular transaction. All right. Now, why do we care? So finding of control has several distinct legal consequences. And just to be clear, this is only relevant. If there's a shareholder lawsuit, no, lawsuit. No problem. But often shareholders Sue and they are you that some kind of transaction with the controller was Unfair to the other shareholders and in that context of finding of control matters for at least three reasons. So first, a controlling stockholder owes fiduciary duties to the minority shareholders. So the controller has to be fair in its dealings with the minority and the corporation as a whole. It can't behave like an arm's length counterparty and that's different from an ordinary stockholder. So like, imagine I have a tiny amount of IBM stock. I don't know any duties to IBM and if I form a contract with IBM, I don't have any responsibility to make sure the contract is fair to IBM. I can look out solely for my own interests but a controlling stockholder is different. They're a fiduciary and they do have to make sure they're dealing with the control company are fair. So that's the first legal consequence that we get The second is the issue of cleansing. And we've talked about this a few times before, and I'll say it again, if any fiduciary engages in a conflicted, transaction with the company, a director and officer or controlling shareholder any fiduciary. If they engage in that transaction, they have to make sure the transaction is fair. And if someone sues that's a really onerous inquiry for the court, it requires Discovery and experts. And there's a whole trial, so courts have come up with these cleansing mechanisms. If the corporation takes the right procedural steps at the outset to protect minority stockholders, then a reviewing Court will just divert to the board and won't let shareholders to if the fiduciary is a direct or an officer, that cleansing mechanism is either the uncon board members have to approve it or the disinterested shareholders have to approve it. But if the fiduciary is a controlling stockholder, then you need both mechanisms a shareholder vote, and, and a proper board. Yeah. Actually the order would be the board vote and then the shareholder and then The shareholder. And that's both right? And that's much more onerous. So cleansing a transaction with someone who was deemed to be a controller is actually very you know, procedurally difficult. And that's the second issue, right? And the whole procedurally difficult because you need to because you need both, but the vote together. I mean, it's one thing to have like a board vote together that happened. That's pretty quickly, but like a shareholder vote, not only do you have to kind of schedule, but you got to go around up the shareholders and get them. Yeah, and all. So if there aren't a whole lot of, if there aren't a lot of unconvicted directors, then maybe even the board is difficult. So unless you have situations where the issue is, actually not at the stockholder levels or level, but that's the second issue. Yeah. And the third issue of control, which doesn't come up that often, but does come up sometimes, and it has to do with the value of control and in particular, the procedural barriers to shareholder lawsuits, so control rights are financially valuable. I mean that's why if someone buys the company they pay a premium for the stock control premium exactly a block of shares that Aggregates. A lot of voting power is more valuable than the shares individually where each individual vote has little influence and sometimes A board functionally hands over some kind of governance power to someone else. Usually an existing investor, maybe the board forms. A contract with that investor to just give them more governance rights, which they can do more easily now, because Delaware, just amended, it's not just allowed allowed, certain certain counterparty shareholders to basically exert control as we say, right? It is a just from a contractual handing it to them, or in a recent case, involving hurts the Board conducted a share buyback and they bought up a lot of the publicly traded Fair shares. And the effect was to increase the proportion at stake of an existing investor. So that investor went from being a large block holder to having hard control more than 50%. Oh and right so you so there so sometimes you have these transactions, we're control rights are functionally transferred to somebody and a shareholder. Might challenge these transactions on the ground, that the board conferred to benefits on someone. Maybe an inside or maybe an activist shareholders or friendly, friendly shareholder in the face of an activist. Sure, exactly my child. So a shareholder might sue and say bored. You handed this valuable control to somebody without giving anything getting anything in exchange. And when that happens, when a shareholder brings that lawsuit, there's an important procedural question. Is that a direct Claim by the shareholder? Or is it a derivative claim? Oh, sure. And that's a matter of whether that shareholder was hurt or whether it was all shareholders were hurt, right? Or whether it was like or whether they're hurt because the company was hurt. So, derivative claims are brought by shareholders, who alleged the board inflicted harm on the corporate body? So, shareholders, were harmed, derivatively and directly are brought when shareholders alleged the board hurt, the individual shareholders, and the difference matters a lot because derivative claims are much harder to bring. There are certain procedural requirements and I'll come back to what those are later. But for now, it's just harder to bring a derivative claim directly as you're easier. And now, there's this new case loss suggesting that at least some of the time, if governance rights are transferred to someone, especially if someone previously, not a controller now becomes one, those claims could be brought directly because the theory is it doesn't hurt the company at all. It just takes away governance rights, that shareholders previously had. So that's the third legal issue that comes up. When we're talking about control. Is this a right? That was taken from some shareholders in distributed to others in? A way that allows shareholders to bring their claims procedurally as direct claims which is just much easier to do. Right. Then it becomes I mean I'm not say a contract case but then it's between the part between the shareholder and the company where the shareholders alleging the harm. Yeah. Yeah. They lost governance rights. The company wasn't harmed at all. The companies fine. It just has a new person who's in charge of it but the shareholders are religion. You took my governance rights away, right? And this is where I think there were worth and I think the remedies should be or whatever. Wow. Okay. So there's those three aspects of it. We started alluding to some of the recent developments. What are, what can you? Let's be a little more specific about what those look like. Yeah, so there are these increasing use of shareholder agreements that allocates specific governance rights to particular investors. And now as we did in a prior show Delaware, talk just a change, the law to make sure that those contracts are valid so we can response to the malleus case exactly. Okay, go ahead. And we also have these large private companies. And they tend to issue preferred stock with different kinds of control rights to different investors and companies are now increasingly going public with very complicated multi-class stocks starting right, which means not and it's not always obvious who has hard control, who has 50% control because investors have all these idiosyncratic governance rights in different kinds of relationships to the board. So this fuzzier malleable test for soft control becomes more important. So it's harder to tell when there's control, but then that's that's the business side. But on the legal side, there are all been developments. As I said, if you want to cleanse a conflicted, Transaction, it matters a lot, whether you're a controller or not a controller, it's harder to cleanse that Trend action. If you're a controller, this different cleansing mechanism. That's relatively new, the case law really only fully developed on that in the last 10 years. So let's say you're a plaintiff, there's a conflicted transaction. You want to sue over it. Very often, the transaction only use one cleansing mechanism, only a shareholder Vote or only independent board approval, which means you is an enterprising plaintiff, your very incentivized to say, hey, I think this person is a controller, so it wasn't cleansed. That's why you see claims. Alleging Elon Musk is a controller of Tesla with 22% of the shares or the votes. There's a case pending now before the Delaware Supreme Court just had our argument and at least as of this recording, the decision hasn't come out yet. That Oracle it alleges that Larry Ellison of Oracle was a controller with only about 28% of the vote, the Oracle bought Ellison's company netsuite, and the vice Chancellor concluded. That Ellison was not a controlling shareholder of Oracle with 28% of the vote. Therefore, they're only needed independent board committee approval to get Court difference. So, rather than all Older photo. Exactly. The planets are arguing Ellison was a controller with only 28%. Therefore Oracle needed, shareholder approval, in addition to board approval and since it didn't get that, the transaction should have been analyzed for fairness. So we see a lot of these cases that try to push the envelope for how control is defined. Meanwhile if the transaction is kind of hinky then a court of equity, I think Delaware is incentivized to say, you know, this could be a controller because that's the only way they can get at these like, you know, sort of transactions that look a little dubious. And so you end up with some decisions that suggests a rather, capacious definition of control and all that are relatively recent developments that come partially from these complex governance structures. And partially from the fact that the law changed to make the legal consequences of control or not control really different Got it. All right, so so we have at least those couple things and then there's others, you know? There's I mean know, lots of others as you and I kind of noodle through this. A plan a little bit. There's I mean, there's many directions as can go. Where do we? Do have any expectation. About what's, you know, how some of these cases are going to work at. You said one, just got argued, but we're not sure it's gonna happen. So give us a little perspective on that. I don't think the current situation is really sustainable. There's just too much uncertainty regarding who counts as the controller and that makes it hard for transaction planners. It makes it hard for litigants and these procedural protections required for controllers, they're not Costless. I mean it's expensive to set up a committee process and then get a shareholder voted. Yeah. It takes time. Smaller transactions, may not be worth it, Vice Chancellor. Just came out with an opinion where he's sort of said, in passing that the company argued that the mfw that that's what it's called. The process was so expensive. It wasn't worth it and he believed it. So I don't want to overstate that because it's only matters. If someone pursues and over smaller, transactions aren't going to be brought directly, they're going to be brought derivatively. If the company is still generally intact and just formed a contract with the punitive controller like Tesla's Solar City, or Oracle buys Larry Ellison's company netsuite. Those lawsuits are brought derivatively and as I said, derivative of actions are hard to bring among other things. The plaintiff has to show that at the time they filed the complaint the board. Had a majority of directors who were beholden to the controller in some way that's an additional requirement cases brought the rively on top of the whole cleansing procedure that the board had Was majority beholden to the punitive controller, so that kind of Forrestal shareholders from bringing lawsuits over, really minor things, but still the current system, it's expensive. And it's a headache. And we're getting these Rumblings, and it's one of the trends of creating dissatisfaction with Delaware as a place to incorporate. This is why Gregory mathy is trying to move TripAdvisor, out of Delaware to Nevada, where the standards are less strictly maker and he and he's and he's a controller or any wants less. See. And yeah. And it's funny because I, I've thought a little bit about, you know, how this, you know, when we get shareholder votes and stuff and I, I would also speculate that one of the reasons that I've seen this all the time that boards don't want to cleanse. Don't want to hold a vote to cleanse a transaction is because they don't want to take the rest. They might lose. Oh yeah I'm sure they don't want to take a little bit but I think they're all so really is a cost to it. Oh yeah. Clearly there's it takes it takes another 12 weeks. it had some time I think people are Companies tend to have a mindset, it's their company, right? Just emotionally resent. It resent, the Restriction. So there are these calls to change the law. We've heard it from academics. We've heard it from members of the bar and I don't think the Delaware Supreme Court is going to change this cleansing standards because it just reaffirmed them, but the legislature could step in and set new standards. But what I think the Delaware Supreme Court certainly could do is try to narrow the concept of who counts as a controller in the first place. And I think we're already seeing hints of this. For example, the question, whether Elon Musk controls Tesla with 22% has come up a couple of times. It came up in his Paypal package case. I actually don't think that makes the legal difference at the end of that case, but it also came up in the case about Tesla's buyout of Solar City. And the court didn't decide whether he was with her there, it didn't manage to avoid that question. But on appeal, the Delaware Supreme Court offered hints that it might limit the definition of control to investors, who can elect or remove, directors approved transactions or block transitions. So that we would really limit it and So now there's this Oracle case pending where they're actually a lot of different arguments but one of them is Larry Ellison was a controlling shareholder with 28% of the vote. And that's another opportunity for the Delaware Supreme Court to start offering more guidance on this. Ha interesting. You and one reason I like I want, I thought I like discussing this. The idea of control is you've written extensive. I mean more than blog posts, you've got a published literature every two articles on this, right? But my big issue with all of this and I said at the beginning, when we ask about control for different reasons, right? We asked to determine if someone has fiduciary duties. We asked to determine if they need this special cleansing mechanism, right? And we asked, and I think we'll ask a lot more in the future to determine if control rights have been taken from the stockholders and transfer to someone else. But even though those are really different things, we actually have this one test for control exercising influence at the board level, considering all these different factors and my view is that we actually should have different tasks depending on why we're actually the question. So for example, the question, whether someone has control over the board's functioning is most important. If we're trying to determine if that's someone has fiduciary duties to the company like again. Company decides to buy an asset from someone who is 1% of the stock that's very different than the company buying an asset from someone who is 45% of who's almost here, near hard control. Exactly. And that latter case, He suspect the 45% stockholder might have had influence over the board's ability to bargain. And if the shareholder doesn't have that kind of influence the shareholder, could have induced the board to overpay for the asset. So we impose fiduciary duties on that shareholder. You can't sell your asset to the company. Unless the deal is fair, but think of a situation like, Ellison and Oracle. Shareholders claim Ellison to controling shareholder, fine. But they aren't saying that because they want to know. If he has fiduciary duty, he definitely has fiduciary duty Oracle board. He's the chief technology officer, there's no question. He said, Gooseberry duties in the Oracle situation, what we really want to know, is can his deals with the company, be cleansed to buy board approval alone or do they need the extra protection shareholder vote? Right? That's the question then. I think we need to go back to asking well, why do we have those protections? And the reason is controlling shareholders are scary. They're scary because they can retaliate against board members or even minority shareholders who go against their wishes. They can use the assets or do all sorts of weird. Exactly they can remove directors, they can refuse to pay dividends and if they do retaliate minority shareholders, can't remove them because they're entrenched. Like so it's not like a director saying, I'm annoyed with the shareholders all punish them if they directed, does that, you vote them out. But when a controller does that, there's nothing you can do. So the theory goes minority shareholders. Or independent board members might be afraid of the controller. And the Dual protection cleansing is supposed to sort of help bolster their courage. They back each other out so much. My theory is if we want to know whether we should use these extra cleansing mechanism, we should ask about that. Is this person capable of retaliating and is this person in trenched? In other words, I think we're using one test to answer different questions that I should use different tests for different places. You're looking for a much more nuanced. As we said when butt produce this, you can consideration of the responses to Control. Exactly. But then, you know, and it's a whether it's hard or soft. And it depends on the situation, depends on whether it's questioning what, the legal implications. But I mean, I'm in academic. I don't have to litigate these things and we have nothing more than you tests. That's why that's why we value that. That's why we love you. so anyway, all right, we have to take a break. There's a lot to think about here. We got other stuff talk about. So let's do that. And we'll come back a little bit. Talk about directors, say on Pay Here at Cheryl the Primacy. This is the free flow media podcast Network, where we cover the, who of the business news? Because investing isn't a, what it's a, who check out our other podcast business pants for fact-based, snart covering companies and Executives and the proxy Countdown. The only podcast that treats company meetings like sporting events, find them on iTunes Spotify or wherever you get your podcasts back to the show. Welcome back to shareholder Primacy. I'm Lipton here with Mike Levin. And we are going to talk about directors, say, on pay which is kind of you, I guess, right? What are very new? And its origins in a little case that we've heard about here. But then you know it's it's a cousin of executive saying. So I mean you mean something other than director cleansing? What do you mean when you say? Oh, so directors say, on pay is Pertains the idea that shareholders should approve. What the amount and structure of what, directors, get paid. You know, most directors in the US are compensated. The other exceptions are directors that are Executives of companies, where they said, though, clearly directors are executive companies that serve another boards, they can pay for service on the other board. And occasionally, you'll have like an investor report for you manage that serves on a company board and they decline the pay because they're getting paid by the portfolio manager. But you know, 90 plus percent, you know. Huge number of independent directors, they're in in part for the money. so, so that's their pay and like, Yeah, you know, we talked for a moment a second ago about executive Sam, pay, and, you know, right now shareholders and this is an SEC requirement shareholders, get to vote. And as we read in proxy statements on an advisory basis, on what they, whether they kind of like, or don't like, what the executives are getting paid. And it's, that's really just sort of a test of sentiment. Can reflect sort of how shareholders feel about the companies, what they're paying the executives. It can also just reflect what the company is feel about the company but that's strictly advisory. The companies can blow it off, they could sort of pay attention, most of large companies, take sort of seriously and try to understand if they're getting really really adverse executive Sam. Pay resolves. They'll they'll try to listen to shoulders and see if they can respond in some way but it legally it has no Force. There's it is no no impact so yeah. Okay. And so, what are you thinking in terms of directors? Well, there I have and this is me. I have long thought about kind of how shareholders relate to directors and how they can I have better influence over the directors that they elect. And, you know, in the US, you know, almost all directors set their own pay. In terms of structure and amount Without Really, any kind of oversight. From Cheryl. There's other than Cheryl there's ability to like kick them out office and, you know, defeat them in an election but there's no Direct Impact or influence that shareholders have over the directors that they like in terms of what they're getting paid. So and I kind of thought about that a lot of something so forth and then when the Detroit case, the test La directors pay case was the preliminary settlement was announced. We talked about this in an earlier show. The Tesla agreed to subject its directors to a binding vote. Of its shareholders approving. What Tesla directors would get paid by the company and I saw that I got very excited. So wow, this could really be cool. and, I kind of wondered, you know, why that you know why we didn't see that before? You know what, you know what's been going on. You know, I looked a little bit in the Delaware law about how directors can pay themselves and I think they can, I mean, you know, about the directors and set their own compensation and just going back to the previous segment. It's considered a conflicted transaction. I mean, if you set your own pay, yeah, right. So it has to be cleansed by a shareholder vote but if it's not cleansed it, they still get the pay. It's just that if someone sues it's analyzed for fairness, right? Right? And and there have been relatively few lawsuits. Over. Yeah. They're gonna call this. Yeah. There have been a couple, but the one that you just talked about a Tesla was one, right? Yeah. Tesla was a big in and importantly, that was that was saddled. So there was no, at least as far as you know, others been no new law created around that, around that case she at least yet. So, McCormick is yet to approve this settlement, but we'll sort of see. Anyway, we can go back and we listened to that segment. We can hear about some of the Nuance there, but the important thing here is that, after that experience, I wondered, how could this apply at other places? Are there other companies that could sort of benefit from shareholder oversight of A director pay in this way, and I decided to try it out. So what I did? Is I identified a bunch of companies and none of them were, you know, as bad as Tesla for sure. You know what they all pay their directors. Wow. And conceived of sort of this doubly binding idea. so, in contrast to the executive say, on pay situation, Whereas strictly advisory and it's just kind of shareholder vote and so forth. I at these companies drafted A bylaw Amendment. So it wasn't just a, like a resolution where we sort of think that the company may be oughta. Should think about this, right? If Cheryl is approved, this the BIOS would get Rewritten to require the shareholder vote. Okay, and it was easy to buy low amendment was like, you know, two sentences, the most company. Bylaws, a few don't actually provide for directors by themselves, but if they do, it was like one sentence directors can pay themselves, whatever form. They're angry reimbursed for expenses or whatever, but it was pretty easy in contrast to other parts of bias. I read. It was pretty straightforward. The other thing was, is the vote was, as we say, binding, this was not some sort of advisory vote. This wasn't going to be one where, you know, we just had to take in the Cheryl's temperature about what we think this is. If the shareholders declined to approve or reject the direct or pay, they don't get paid. And that's what we had in mind for Tesla. Or with the parties at the Tesla case had mine for the South was you know you got to approve it. So directors work for free or do they come back with a new pay package? That's a good question. I don't know if if they, if they reject it. Maybe directors have to work for, maybe they don't quit, I don't know. You know, presumably, you know, they're in it and, you know, the independent directors and it's sort of for the money, the USA I assume there's in the credential you put it on but the expectation would be that if you know, in some way and look the likelihood of it. There being rejected is pretty low, you know the incidence of successful Executives and pay is quite High. Yeah, interestingly in Oracle yes, shareholders rejected Larry Ellison's pay and the fact that they kept it in place was one of the factors that was used to argue that he had control but again because it was not binding and they basically said, you know, Cheryl there's pounds and we know he directed rejected the pay but yeah, I remember that vote. So anyway, so the idea would be that it would be this The Binding vote as we said, and we I work with a friend of mine listeners here, probably know the name John Chavez in. He's this veteran experience governance proposer. I was talking about it with him. He says, it's really cool idea. Mike, let's see what happens. So, he and I identified about 13 of his portfolio companies, where we should, we should propose this. And I I had never written a older proposal before. Under 1488, as we say under the sec's rules for allowing this kind of thing. So it was quite a new experience to me, John's done it, you know, dozens and dozens and dozens of times for the last 20 or 30 years, he's done it. Plenty But this is all very new to me. So we identified 13 companies Wrote a proposal and the proposal was a bylaw Amendment for this binding vote where it would you know, be approved. We submitted him at author 13 companies. There were some Many companies, eight of them requested from the SEC. No action relief. Which was kind of interesting. I had never seen that happen before at least personally, you know, myself, there were two bases, that the company is asked for no action relief. The first was that the shareholder proposal potentially could cause them to violate Delaware law. And that was because when we structured, the bylaw Amendment, we were going to do it in a way where The directors were not able to vote their own shares. Director shareholders were not able to vote their own shares on the proposal that was actually written into the Tesla director, the Detroit settlement that like Elon Musk and Kimball musk and any directors is over, we're not be able to vote for their own pay and it made perfectly good sense to us, of course. But the companies argue that that you can't disenfranchise those shareholders and we try to argue, well, you know, but there's other places that we went back and forth and the The company's got these very a letter from local Delaware Council saying, how these 10 page letters and several of the companies got the same letter. From the same company. So, you know, that was good business, if they could get it, those firms. Anyways. So we got to know action request, we wrote Our Roboto and then I know just trying. Yeah, I love it because I'm trying to, I mean, like, I could see can't like, say they don't do for their shares, but you could certainly set a standard that says, it requires a majority of the decision. That's so weird. That. Yes, absolutely could we? But so we The idea of shareholding share owning directors, not being able to vote their shares was I think an interesting and useful attribute but it was not clearly wasn't essential. So after out of the eight, I think six no action requests were eventually granted on that basis. We said we're not making that mistake. Again, if we if we go back and do this, we just take that part out. And and not require those directors to vote to not vote their shares, and then five of the companies for whatever. And then two of the companies sought no action relief, based on some argument of micro-management, you know, it's ordinary business. Ordinary business. Yeah. Where they they said, you know, this is responsibility the board to set pay, and so on and so forth. And that was a little harder. For us to try to get her heads around. Yeah, I would think that, but again, you know, try telling us the SEC at this point. So, So those five did not five of the companies did not see no action relief. So we went and wrote Exempted solicitation arguments are kind of responding to the companies. Response. So again this is all new to me. So they put our proposal in the proxy with our 500, word limit, you know. Fortunately, we were able to sort of fit in that because the bioluminescent was was pretty tiny and then they wrote their response and then we wrote a an exempt, solicitation argument kind of responding to what the company putting their proxy and so forth. So that was really cool. So there were five companies where we're at, okay. And It really, it didn't go very far. The average amount of support from Shareholders for this was like about 2%. Oh no, it was really low. It was very disappointing and and and John consult me. He said, oh, you know, this happens the first time and so forth. Not just, you know, we we had reached out to Jim Sheriff holders to try to get Some feedback about it. And some Cheryl there's I was talking to you some of the big indexers and the companies we know where they say, that's interesting idea. I did talk to one person who said no, this is a bad idea. So why? So you know, we have so much to vote on. This is not a brand I'm saying, don't you want to like, you know, This kind of be able to exert this kind of authority over over directors and it didn't get really really it wasn't very fruitful discussion. I will say that So sometimes these things. Yeah, I mean it's true. There are a lot of types of proposals that don't get a lot of support at first. And it takes time to persuade shareholders is something that you exactly in part of my promise. I'm stubborn. And I really like the idea of a binding vote based on a bylaw Amendment. I'm not satisfied with the idea of just sort of this pocket or a sense of the you know this is you know because again we're not talking about Executives, they're talking about the directors that we lacked, we shareholders activists elect and I think we should be able and the only Leverage, we have oversees whether we vote him out of office and for that to really happen, we need a you need a proxy contest. You know, because the, you know, majority vote standard is just doesn't really work. Um, you know, there's so many zombie directors, so many directors that yeah, very few. So, that kind of, so, we'll sort of see what happens, you know, I've talked to John a little bit about 2025. We may kind of submit some proposals that are a little less, I suppose less threatening. Yeah, but we'll see how it goes. Yeah, I mean, what are the interesting things about bylaws is, it's really, I mean, I'll just say, directors, have the power to pass by laws and shareholders of the power to pass by laws, and at least in Delaware, there's no obvious reason why aboard can't just take like you could pass the Bible and they could get rid of it. Oh, right. I mean, the only limit literally in Delaware law that I'm aware of, is that if you have to buy a lot about the voting standard for like, to elect the directors. Like, if you made it already. Yeah. But otherwise, but under the NBC a, if it's a model business Corporation act State, they have a provision that should pass by laws and say and directors can't touch it. Right. But in this instance, the extent that I was able to learn anything about it. We had this fear that if yeah somehow magically and all the companies we looked at had a majority of our standing shares to approve by aluminums. Yeah. So shareholders were you know clearly able to propose by Alan amendments and you know wasn't super majority standard and this fear that okay. If by you know, some odds we Chevrolet's approve. One of these. Can't the company just go back and just say, forget it, we're gonna we're gonna change it the next week, they may not like it. But yeah, I mean, yeah, I mean there's the that happened. It wasn't a, it was a separate chair. And CEO happened at Bank of America, the shelter's voted to separate the roles and Bank of America just put. So we'll see what happens next year. But that was, that was my my journey through. Yeah, the Cheryl 14 age. You're holding her proposal process with with this novel idea, on director, say on pay and stay tuned. We'll see if we do it again next year. I don't know. There's there's a lot of other things to think. so, All right. Well, let's wrap up there and we'll cover more next time. Yes, I think we can. It's been terrific talking about all this and this is shareholder Primacy hosted by and lived. In me Mike Levin, independent activist investor and advisor to investors about their activist situation. And is, of course, the Mike Lynn Fleischman professor in business, law and Entrepreneurship between law school and an affiliate of two lanes, Murphy Institute, you can find me Mike at the activist investor.com and findlay.edu. Our podcast is produced and distributed by free flow media. Thanks for listening and we will talk again soon. Imagine.