Corporate Governance

Kurz v. Holbrook: Shareholder Voting, Omnibus Proxies, and the Role of DTC: The Goal of Profit Maximization

By J Robert Brown Jr.

We are discussing Kurz v. Holbrook, 2010 Del. Ch. LEXIS 24 (Del. Ch. Feb. 9, 2010).

There is often a debate over whether board are really obligated to engage in profit maximizing behavior.  As commentators sometimes note, corporate statutes don't mention the phrase.  Boards instead are obligated to act in the best interests of shareholders, which may or may not equal profit maximization. 

We note only that VC Laster looks to be squarely in the profit maximization camp, at least from the shareholder perspective.  As he noted in Kurz:  "What legitimizes the stockholder vote as a decision-making mechanism is the premise that stockholders with economic ownership are expressing their collective view as to whether a particular course of action serves the corporate goal of stockholder wealth maximization."  In other words, shareholders do not want companies to engage in philanthropy or socially beneficial behavior unless also maximizing wealth. 

For more on the entire system of beneficial ownership and the role of the depositories, see The Shareholder Communication Rules and the Securities and Exchange Commission: An Exercise in Regulatory Utility or Futility?  The opinion and a number of primary materials are posted at the DU Corporate Governance web site.

Full post as published by The Race to the Bottom on March 13, 2010 (boomark / email).