Two interesting posts from Tom Goldstein on today's oral argument before the Supreme Court. The first speculates that--based on his reading of the oral argument tea leaves--that there are two likely outcomes, one of which could lead to the court splintering badly:
First, a majority (the Chief Justice plus the liberal members of the Court) could decide that the petitioners lack standing. That would vacate the Ninth Circuit’s decision but leave in place the district court decision invalidating Proposition 8. Another case with different petitioners (perhaps a government official who did not want to administer a same-sex marriage) could come to the Supreme Court within two to three years, if the Justices were willing to hear it.
Second, the Court may dismiss the case because of an inability to reach a majority. Justice Kennedy takes that view, and Justice Sotomayor indicated that she might join him. Others on the left may agree. That ruling would leave in place the Ninth Circuit’s decision.
(The puzzle will be what judgment the Court will enter if there are, for example, three votes to dismiss as improvidently granted, two to find no standing, three to reverse, and one to affirm.)
The second puzzles over whether it will be possible for the court to get to a 5-vote majority:
At least insofar as the oral argument is revealing, the puzzle of Hollingsworth is how the Court will “get to five” – how five members of the Court will agree on the judgment.
This is a recurring dilemma when there is a threshold question in the case – here, the petitioners’ standing to defend Proposition 8. The problem gets even bigger when you add in the possibility that one or more members of the Court do not want to decide the case at all – here, Justice Kennedy’s suggestion that the writ of certiorari should be dismissed.
There is only one question on which it seemed five Justices might agree: the judgment should be vacated because the petitioners lack standing. The Chief Justice and the four more liberal members of the Court indicated their sympathy for that position. ...
But assuming that the Court does not vote to vacate the judgment for lack of standing, and therefore reaches the merits, what then? There seem to be four votes to reverse and uphold Proposition 8 (the Court’s conservatives) and four to affirm (the Court’s more liberal members). Justice Kennedy is the ninth vote, and he suggested that he would prefer the Court not decide the case. ...
But whether a Justice can decline to decide a case on the ground that it should be dismissed, when no development has occurred since certiorari has been granted, is a difficult and debated question in the Court. (Ironically, one of the most relevant authorities is an early predecessor to gay rights litigation, New York v. Uplinger.) If Justices were perfectly free to do so, then in theory the Court’s “rule of four” – that four members of the Court can vote to grant certiorari – would be in jeopardy: five Justices who did not grant certiorari could simply refuse to decide the case. On the other hand, a Justice could reserve the power not to decide the merits for extraordinary cases.
It is an interesting question. As Justice Harlan once explained:
I do not think that ... voting to dismiss a writ after it has been granted can be justified on the basis of an inherent right of dissent. In the case of a petition for certiorari that right, it seems to me-again without the presence of intervening factors-is exhausted once the petition has been granted and the cause set for argument. Otherwise the ‘rule of four’ surely becomes a meaningless thing in more than one respect. First, notwithstanding the ‘rule of four,’ five objecting Justices could undo the grant by voting, after the case has been heard, to dismiss the writ as improvidently granted-a course which would hardly be fair to litigants who have expended time, effort, and money on the assumption that their cases would be heard and decided on the merits. While in the nature of things litigants must assume the risk of ‘improvidently granted’ dismissals because of factors not fully apprehended when the petition for certiorari was under consideration, short of that it seems to me that the Court would stultify its own rule if it were permissible for a writ of certiorari to be annulled by the later vote of five objecting Justices. Indeed, if that were proper, it would be preferable to have the vote of annulment come into play the moment after the petition for certiorari has been granted, since then at least the litigants would be spared useless effort in briefing and preparing for the argument of their cases. Second, permitting the grant of a writ to be thus undone would undermine the whole philosophy of the ‘rule of four,’ which is that any case warranting consideration in the opinion of such a substantial minority of the Court will be taken and disposed of. It appears to me that such a practive would accomplish just the contrary of what representatives of this Court stated to Congress as to the ‘rule of four’ at the time the Court's certiorari jurisdiction was enlarged by the Judiciary Act of 1925. In effect the ‘rule of four’ would, by indirection, become a ‘rule of five.’ Third, such a practice would, in my opinion, be inconsistent with the long-standing and desirable custom of not announcing the Conference vote on petitions for certiorari. For in the absence of the intervening circumstances which may cause a Justice to vote to dismiss a writ as improvidently granted, such a disposition of the case on his part is almost bound to be taken as reflecting his original Conference vote on the petition. And if such a practice is permissible, then by the same token I do not see how those who voted in favor of the petition can reasonably be expected to refrain from announcing their Conference votes at the time the petition is acted on. [Ferguson v. Moore-McCormack Lines, Inc., 352 U.S. 521, 560-62 (1957) (Harlan, J., concurring in part, dissenting in part)]
On the other hand, I am not insensible of the merits of Justice Stevens' argument that dismissal on grounds that cert was improvidently granted can be an appropriate exercise of judicial restraint:
As long as we act prudently in selecting cases for review, there is relatively little to be lost, and a great deal to be gained, by permitting four Justices who are convinced that a case should be heard to have it placed on the calendar for argument. It might be suggested that the case must be decided unless there has been an intervening development that justifies a dismissal. See generally Rice v. Sioux City Cemetery, 349 U.S. 70, 75 S.Ct. 614, 99 L.Ed. 897 (1955). I am now persuaded, however, that there is always an important intervening development that may be decisive. The Members of the Court have always considered a case more carefully after full briefing and argument on the merits than they could at the time of the certiorari conference, when almost 100 petitions must be considered each week. Nevertheless, once a case has been briefed, argued, and studied in chambers, sound principles of judicial economy normally outweigh most reasons advanced for dismissing a case. Indeed, in many cases, the majority may remain convinced that the case does not present a question of general significance warranting this Court's review, but nevertheless proceed to decide the case on the merits because there is no strong countervailing reason to dismiss after the large investment of resources by the parties and the Court.
A decision on the merits does, of course, have serious consequences, particularly when a constitutional issue is raised, and most especially when the constitutional issue presents questions of first impression. The decision to decide a constitutional question may be the most momentous decision that can be made in a case. Fundamental principles of constitutional adjudication counsel against premature consideration of constitutional questions and demand that such questions be presented in a context conducive to the most searching analysis possible. ... The policy of judicial restraint is most salient in this Court, given its role as the ultimate expositor of the meaning of the Constitution, and “perhaps the most effective implement for making the policy effective has been the certiorari jurisdiction conferred upon this Court by Congress.” Rescue Army v. Municipal Court, 331 U.S. 549, 568, 67 S.Ct. 1409, 1419, 91 L.Ed. 1666 (1947). If a majority is convinced after studying the case that its posture, record, or presentation of issues makes it an unwise vehicle for exercising the “gravest and most delicate” function that this Court is called upon to perform, the Rule of Four should not reach so far as to compel the majority to decide the case. [New York v. Uplinger, 467 U.S. 246, 250-51 (1984) (Stevens, J., concurring).]
Quote of the Day
Gerard N. Magliocca
Courtesy of a live blog from the WSJ:
JUSTICE SCALIA: When did it become unconstitutional to ban same-sex marriage? Was it 1791? 1868?
TED OLSON: When did it become unconstitutional to ban interracial marriage?
JUSTICE SCALIA: Don't try to answer my question with your own question.
Interesting new paper:
This paper shows an application of Promotion Tournaments to religious organizations, which is appropriate, especially in the case of highly ranked institutions such as the Catholic Church. With this objective, we seek to verify the suitability of the use Tournaments in religious organizations, regarding the optimal structure of contracts in order to select, as well as, to promote clerics. Two models are addressed, modified from the originals, through the inclusion of psychic income, both with two clerics with homogeneous skills. Finally, we discuss the advantages and limitations of the Tournaments applied to religious organizations, including its risks and distortions therein.
Oliveira, Lívio Luiz Soares de and Neto, Giacomo Balbinotto, The Problem of the Principal-Agent and Promotion Tournaments in Religious Organizations: Choosing the Pope (February 20, 2013). Available at SSRN: http://ssrn.com/abstract=2221280
When I first heard that Carl Icahn was considering bidding for Dell, I was quite surprised. Icahn's not a private equity guy who buys and develops portfolio companies. Instead, he's a fast buck artist who specializes in pure financial plays. His few high profile efforts to actually manage a business have ended disastrously, as when he asset stripped TWA before driving it into the ground once and for all. See Time to Sell! World’s “worst stock picker” Carl Icahn buys into Brazilian mining company, for an overview of Icahn's ineptitude as an investor/manager. He can only make money as a raider, looter, and greenmailer.
Fortunately, we have Steven Davidoff to dig through these stories and come up with the goods:
Mr. Icahn has reportedly acquired 6 percent of Dell and is now proposing two alternatives to the buyout.
The first is that if the proposed acquisition is voted down, the computer maker’s board should immediately declare a dividend of $9 a share, taking on an additional $5.25 billion of debt to pay for it. According to Mr. Icahn, Dell stock is worth roughly $13.81 a share, so shareholders would have a total value of $22.81 a share.
If the board does not implement his proposed dividend recapitalization, Mr. Icahn then indicated that Dell should commit to hold its annual meeting at the same time shareholders vote on the deal. Mr. Icahn then generously promised to run his own slate of directors to replace the current board.
If his slate proved victorious, Mr. Icahn’s handpicked directors could then implement his first proposal. In that instance, Mr. Icahn also promised to provide this $5.25 billion loan from his own personal wealth and that of his own fund.
In other words, Icahn has no interest in running in Dell. Instead, he's looking for a quick payout that will leave Dell with huge debt and, in all probability, unable to compete in the turbulent PC market.
Unfortunately, Dell's board probably has little legal room to maneuver against Icahn. Because Dell and his buyout partners proposed taking the company private, there is a proposed change of control triggering Revlon duties. See my article The Geography of Revlon-Land (July 23, 2012). 81 Fordham Law Review, (Forthcoming 2013); available at SSRN: http://ssrn.com/abstract=2115769. As a result, Dell's board may only consider short term shareholder wealth maximization--they must get the highest possible price.
But does that make any sense? Should directors really be forced to sell into a financial play that maximizes short term payout at the cost of leaving the company swamped by debt and at risk of collapse?
... in either case, if Blackstone or Mr. Icahn gets to this final bid stage (and remember either may not make a final bid – what is happening right now is really a placeholder), this will not be an easy decision for the Dell board. It will not be simply considering who is the highest bidder for the entire company. Instead, it will probably have to weigh proposals that keep part of the company public, and this will mean weighing the value of a future Dell. This is not the easy determination of merely weighing cash bids – there you pick the highest. Instead, the board will have to assess the value of what may be a highly leveraged Dell without its current management and a declining business model. In this situation Silver Lake’s current bid may still be a superior one, despite the disapproval that such a determination would be met with by some of Dell’s shareholders.
If the Delaware courts allow the Dell board sufficient leeway, they could reject Icahn's bid on the perfectly reasonable grounds that it would leave Dell overly leveraged and thus put shareholders at risk of firm failure.
Alternatively, perhaps the Delaware courts will finally embrace my argument that Revlon is about conflicts of interest and entrenchment motives. If Dell's independent board members continue to embrace a best practice approach, demonstrating that they are not trying to entrench themselves--or, more important, Michael Dell--in office, there is no good reason for Delaware to apply Revlon in a formalistic way that requires Dell to sell to Icahn.
Reaffirming that the advisory "say-on-pay" vote required by the Dodd-Frank Act cannot be used to attack directors' executive compensation decisions, the United States District Court for the District of Delaware recently dismissed a derivative complaint brought after a negative say-on-pay vote. The court, applying Delaware law, found that the plaintiff had not pleaded facts sufficient to show that demand would have been futile, or to state a claim upon which relief could be granted. Raul v. Rynd, C.A. No. 11-560-LPS (D. Del. March 14, 2013).
The complaint was filed in 2011, and was one of a number of similar lawsuits filed after Dodd-Frank's requirement for advisory votes on compensation came into effect. The plaintiff challenged the board's compensation decisions, alleging that increased compensation in a year when the company posted a net operating loss and negative shareholder return violated the company's pay-for-performance philosophy and rendered the company's compensation disclosures in its proxy statement misleading. The plaintiff asserted that the negative shareholder advisory vote rebutted the presumption of business judgment surrounding the board's compensation decisions.
In dismissing the complaint, the court found that the plaintiff "misconstrue[d] the effect of the shareholder vote" and "mischaracterize[d]" the compensation plan, holding that the plaintiff's allegations based on the advisory vote "fail to recognize the realities of Dodd-Frank" -- namely, that the Act "explicitly prohibits construing the shareholder vote as 'overruling' the Board's compensation decision" or altering directors' fiduciary duties. The court further noted that the plaintiff's "selective" characterization of the company's compensation philosophy as "pay for performance" excluded the other goals discussed in the company's proxy statement.
The Raul decision reinforces the Dodd-Frank Act's bar on attempts to use the advisory shareholder vote to overrule directors' business judgment on matters of executive compensation. The decision recognizes that directors should be permitted to determine appropriate compensation for executives in accordance with their company's overall compensation philosophy -- including such motivations as attracting, retaining, and incentivizing executives -- without fear that they will be subject to liability should shareholders express disagreement with those judgments through an advisory say-on-pay vote.
New York’s Court of Appeals recently refused to resolve the issue of gay marriage as a constitutional matter; instead, albeit over sharp dissent, the court’s majority threw the issue back to the legislature.
"We hold that the New York Constitution does not compel recognitionof marriages between members of the same sex. … Whether such marriages should be recognized is a question to be addressed by the Legislature," the court said.
Whether or not that was the right decision as a matter of constitutional interpretation can be debated, but as a prudential matter it was almost certainly correct. Judicial resolution of hot button cultural issues has all too often contributed to polarization and social division.
Consider the case of abortion rights. Former Democratic Congressman, Clinton Administration White House Counsel and federal judge Abner Mikva once explained that: "I support the result of Roe v. Wade. … But … in retrospect, I wish the court had stayed its hand and allowed the political process to continue, because we would have legislated the effect of Roe v. Wade in most states — not all of them, but in most states — and we wouldn’t have had to pay the political price we’ve had to pay for it being a court decision. The people who are angry at that court are angry beyond measure. As far as they are concerned the whole system is rotten because they’ve lost their opportunity to slug it out."
Justice Ruth Bader Ginsburg has likewise stated that "Roe v. Wade ... halted a political process that was moving in a reform direction and thereby, I believe, prolonged divisiveness and deferred stable settlement of the issue."
Because it is custom, tradition, and long familiar patterns that enable people to live together peaceably, social change needs to come slowly. Change and progress are necessary, of course, but sudden change disrupts social bonds, induces stress and engenders controversy as old and vested interests are upset.
Sudden change by a cabal of unelected and largely unaccountable judges is particularly likely to engender controversy. Again, I’ll let Judge Mikva explain: "I don’t think it’s an accident that our founders put the legislative branch in the first article of the Constitution. The reason is that they perceived it to be the first among equals. Most of the people who’d been in Philadelphia had been members of the colonial legislatures, had been members of the Continental Congress, of the early congresses, and they understood the legislative process. They knew how it worked, and they recognized that there was a direct tie between where the people were and where the legislative branch was. They … were nervous about the judges because the English judges had not been an unmixed blessing as far as the colonies were concerned."
Mark Rienzi, God and the Profits: Is There Religious Liberty for Money-Makers? (March 7, 2013). Available at SSRN: http://ssrn.com/abstract=2229632:
Abstract: Is there a religious way to pump gas, sell groceries, or advertise for a craft store?
Litigation over the HHS contraceptive mandate has raised the question whether a for-profit business and its owner can engage in religious exercise under federal law. The federal government has argued, and some courts have found, that the activities of a profit-making business are ineligible for religious freedom protection.
This article offers a comprehensive look at the relationship between profit-making and religious liberty, arguing that the act of earning money does not preclude profit-making businesses and their owners from engaging in protected religious exercise.
Many religions impose, and at least some businesses follow, religious requirements for the conduct of profit-making businesses. Thus businesses can be observed to engage in actions that are obviously motivated by religious beliefs: from preparing food according to ancient Jewish religious laws, to seeking out loans that comply with Islamic legal requirements, to encouraging people to “know Jesus Christ as Lord and Savior.” These actions easily qualify as exercises of religion.
It is widely accepted that religious freedom laws protect non-profit organizations. The argument for denying religious freedom in the for-profit context rests on a claimed categorical distinction between for-profit and non-profit entities. Yet a broad examination of how the law treats these entities in various contexts severely undermines the claimed categorical distinction. Viewed in this broader context, it is clear that denying religious liberty rights for profit-makers would actually require singling out religion for disfavored treatment in ways forbidden by the Free Exercise Clause and federal law.
If you don't want to read a 40 page law review article, here's a short summary.
Francis, Bill, Hasan, Iftekhar and Wu, Qiang, Professors in the Boardroom and their Impact on Corporate Governance and Firm Performance (February 28, 2013). Available at SSRN: http://ssrn.com/abstract=2226411:
Directors from academia served on the boards of more than one third of S&P 1,500 firms over the 1998-2006 period. This paper investigates the effects of academic directors on corporate governance and firm performance. We find that companies with directors from academia are associated with higher performance. In addition, we find that professors without administrative jobs drive the positive relation between academic directors and firm performance. We also show that professors’ educational backgrounds affect the identified relationship. For example, academic directors with business-related degrees have the most positive impacts on firm performance among all the academic fields considered in our regressions. Furthermore, we show that academic directors play an important governance role through their monitoring and advising functions. Specifically, we find that the presence of academic directors is associated with higher acquisition performance, higher number of patents, higher stock price informativeness, lower discretionary accruals, lower CEO compensation, and higher CEO turnover-performance sensitivity. Overall, our results provide supportive evidence that academic directors are effective monitors and valuable advisors, and that firms benefit from academic directors.
CEO’s of large firms interested in increasing their profits should click here
The internal affairs doctrine is a conflict of laws principle that recognizes that only one state should have the authority to regulate a corporation’s internal affairs. Under the internal affairs doctrine, that special state is the state of incorporation. But what exactly constitutes a corporation’s ”internal affairs”? Many lawyers, particularly those in Delaware, take a broad view of what constitutes an internal affair. However, the U.S. Supreme Court has actually enunciated a rather narrow view: “matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders”. Edgar v. MITE Corp., 457 U.S. 624, 645 (1982).
One might assume that the liability of shareholders for corporate obligations is an internal affair. However, the Nevada Supreme Court has permitted piercing the corporate veil of a Washington corporation. McCleary Cattle Co. v. Sewell, 317 P.2d 957 (Nev. 1957). In Plotkin v. Nat’l Lead Co., 482 P.2d 323 (1971), the Supreme Court assumed that the alter ego doctrine could be applied to a Wisconsin corporation (although it declined to conclude that the owners were in the alter ego).
I discuss this issue in Corporation Law, in which I explain that: New York law is instructive on this score, not least because that state seems to generate more veil piercing cases than any other. New York relies on a choice of law rule known as the paramount interest test, under which “the law of the jurisdiction having the greatest interest in the litigation will be applied and . . . the facts or contacts which obtain significance are those which relate to the purpose of the particular law in conflict.” A number of federal decisions applying the New York standard have held that the state of incorporation (of the corporation whose veil is to be pierced) has the paramount interest with respect to veil piercing claims and, accordingly, applied that state’s law. The state of incorporation’s interest derives from the fact that it is that state whose law confers limited liability on the enterprise in the first place.Surprisingly, Delaware courts do not always apply the law of the state of incorporation. Where a Delaware parent corporation is to be held liable for the acts of a nonDelaware subsidiary (i.e., the subsidiary’s corporate veil is to be pierced), Delaware courts have applied Delaware law. On the other hand, where it is a Delaware corporation whose veil is to be pierced, Delaware courts do apply their state’s law. Maybe the Delaware rule is just to apply Delaware law!
 Intercontinental Planning, Ltd. v. Daystrom, 248 N.E.2d 576, 582 (N.Y. 1969) (internal quotation marks omitted).
 See, e.g., Fletcher v. Atex, Inc., 68 F.3d 1451, 1456 (2d Cir. 1995); Soviet Pan Am Travel Effort v. Travel Committee, Inc., 756 F. Supp. 126, 131 (S.D.N.Y. 1991). An interesting wrinkle on the choice of law problem is presented when the veil piercing claim arises under a federal statute. In U.S. v. Bestfoods, 524 U.S. 51 (1998), the Supreme Court noted the “significant disagreement among courts and commentators over whether, in enforcing CERCLA’s indirect liability, courts should borrow state law, or instead apply a federal common law of veil piercing.” Id. at 63 n.9. Unfortunately for those who like doctrinal closure, the court declined to resolve that disagreement. Id.
 Soviet Pan Am Travel Effort v. Travel Committee, Inc., 756 F. Supp. 126, 131 (S.D.N.Y. 1991).
 Japan Petroleum Co. (Nigeria) Ltd. v. Ashland Oil, Inc., 456 F. Supp. 831, 840 n.17 (D. Del. 1978).
 Mobil Oil Corp. v. Linear Films, Inc., 718 F. Supp. 260, 267 (D. Del. 1989).
Short answer: No.
Longer answer: Think Progress reports that:
Starbucks CEO Howard Schultz continued to defend his company’s support for marriage equality at a shareholders meeting Wednesday, pointing out that “not every decision is an economic decision.” Shareholder Tom Strobhar suggested that the company’s stock dipped a bit when the National Organization for Marriage launched a “Dump Starbucks” boycott last year, but Schultz expressed no concern about the company’s viability moving forward:
STROBHAR: In the first full quarter after this boycott was announced, our sales and our earnings — shall we say politely — were a bit disappointing.
SCHULTZ:If you feel, respectfully, that you can get a higher return than the 38 percent you got last year, it’s a free country. You can sell your shares of Starbucks and buy shares in another company. Thank you very much.
Let's say Strobhar sued, claiming that Starbucks' management and board was breaching their fiduciary duties to the shareholders by alienating some customers. Would Schultz et al. have to prove that there were corresponding benefits that outweighed any such losses, such that Starbucks was a net gainer? (After all, a high return is no defense if you could have gotten an even higher one.)
No, of course not. The business judgment rule would stop the suit dead. I am reminded here of Shlensky v. Wrigley, 237 N.E.2d 776 (Ill. App. 1968).
Shlensky challenged Philip Wrigley’s famous refusal to install lights in Wrigley Field. Shlensky was a minority shareholder in the corporation that owned the Chicago Cubs and operated Wrigley Field. Wrigley was the majority stockholder (owning 80% of the stock) and president of the company. In the relevant period, 1961-1965, the Cubs consistently lost money. Shlensky alleged that the losses were attributable to their poor home attendance. In turn, Shlensky alleged that the low attendance was attributable to Wrigley’s refusal to permit installation of lights and night baseball.
In the course of rejecting Shlensky's claim, the court noted that “the effect [of night baseball] on the surrounding neighborhood might well be considered by a director.” Likewise, the court asserted that “the long run interest” of the firm “might demand” consideration of the effect night baseball would have on the neighborhood. (At that time, the corporation owned not just the Cubs but also Wrigley Field and the land on which it stands.) But the court went on to explain that:
By these thoughts we do not mean to say that we have decided that the decision of the directors was a correct one. That is beyond our jurisdiction and ability. We are merely saying that the decision is one properly before directors and the motives alleged in the amended complaint showed no fraud, illegality or conflict of interest in their making of that decision.
Thus, Wrigley did not have to show that his decision was supported by some sort of cost-benefit analysis.
Also on point is the case of Bayer v. Beran, 49 N.Y.S.2d 2, 6 (Sup. Ct. 1944), in which the corporation began sponsoring a opera radio program and hired the CEO's wife to sing on it (along with many others). The court explained that:
To encourage freedom of action on the part of directors, or to put it another way, to discourage interference with the exercise of their free and independent judgment, there has grown up what is known as the “business judgment rule.” ... “Questions of policy of management, expediency of contracts or action, adequacy of consideration, lawful appropriation of corporate funds to advance corporate interests, are left solely to their honest and unselfish decision, for their powers therein are without limitation and free from restraint, and the exercise of them for the common and general interests of the corporation may not be questioned, although the results show that what they did was unwise or inexpedient.” Pollitz v. Wabash R. Co., 207 N.Y. 113, 124, 100 N.E. 721, 724. Indeed, although the concept of “responsibility” is firmly fixed in the law, it is only in a most unusual and extraordinary case that directors are held liable for negligence in the absence of fraud, or improper motive, or personal interest.
The court further explained that "It was for the directors to determine whether they would resort to radio advertising; it was for them to conclude how much to spend; it was for them to decide the kind of program they would use. It would be an unwarranted act of interference for any court to attempt to substitute its judgment on these points for that of the directors, honestly arrived at."
In sum, the fact that shareholders don't like the positions on an issue of public import taken by a corporation states no grounds for legal intervention. Their choices are simple: (1) Try to persuade like-minded shareholders to elect new directors who will take a different position or (2) follow the Wall Street Rule (it is easier to switch than fight).