In the March issue of Unsolicited Views, we published an article entitled “Practical Tips on Board Confidentiality.” In that article, we warned that “the increasing number of board members selected by activists and other investors has increased the likelihood of informational conflicts involving stockholder-designated directors.” We also noted that the exercise of vigorous dissent is fully consistent with board member’s responsibilities, but that as articulated by Delaware courts, dissent must be exercised within the bounds of the board members’ fiduciary duties and legal requirements in a manner intended to benefit all shareholders, not just those that nominated, elected or designated them to the board.
The recent controversy regarding Bill Ackman’s tumultous tenure as a member of J.C. Penney’s board of directors, including public statements by Ackman that disclosed confidential boardroom deliberations and ultimately resulted in his resignation from the company’s board, serve as a prescient reminder of these challenging issues. To be sure, Ackman was also being held to account for his lead role in bringing Ron Johnson to J.C. Penney as CEO, but it was his public statements and the threat of legal action by J.C. Penney that served as the catalyst for his resignation.
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