A Delaware court rejected a shareholder’s attempt to obtain further materials from a company via a Delaware General Corporation Law §220 proceeding.¹

At issue was a company’s public opposition of a state’s proposed legislation. A shareholder contended that, in directing the company to publicly oppose the bill, the directors “either put their own beliefs ahead of their obligations to stockholders or flouted the risk of losing rights associated with [a special land district].”

The court, in dismissing the plaintiff’s proceeding and entering judgment for the company, acknowledged that “corporate speech on external policy matters brings both risks and opportunities,” and explained that the board is “empowered to weigh these competing considerations and decide whether it is in the corporation’s best interest to act (or not act).”

The court added, “a board may conclude in the exercise of its business judgment that addressing interests of corporate stakeholders – such as the workforce that drives a company’s profits — is ‘rationally related’ to building long-term value.” As a result, the court determined that the plaintiff did not have a “credible basis” to suspect wrongdoing or mismanagement, and therefore plaintiff’s request for additional production of books and records pursuant to §220 was rejected.

Read more in “Two Courts Defer to Boards’ ESG Decisions and Side with Defendants”.

Simeone v. Walt Disney Co., 2023 Del. Ch. LEXIS 154 (Del. Ch. 2023)

¹ 8 Del. C. §220