Friday, August 10, 2018
Boardroom scene in "Succession"
A question for the Corp/Bus Orgs folks out there: What did people think of the boardroom scene in Episode 6 of Succession, showing a motion for a vote of no confidence against the CEO* and the rules of order and machinations going before and after it. Worth showing in class as an example of corporate governance and democracy?
[*] Purportedly based on the real-life move against Michael Eisner at Disney.
The family nature of the entity gave that scene a very unusual dynamic. I do think the vote gathering process was valuable because at least you get to see the “politics” of corporations playing out. Having been in that situation on occasion (as advisor or board member) certainly the tension is real.
Posted by: Steve Diamond | Aug 14, 2018 7:28:13 PM
I haven’t watched the show, Howard, but I can’t imagine a BOARD passing a “motion of no confidence” against a CEO. That is a symbolic gesture. Boards don’t need to engage in symbolic gestures vis-a-vis the CEO. If there are votes to express no confidence in a CEO, then you wonder why there aren’t votes to fire the CEO. If there are board members who have doubts about the CEO but aren’t ready to fire the CEO, you’d do all sorts of things to get the CEO on track with the Board, but acting like a parliament isn’t how you would do it.
Boards, when they are working correctly, are collaborative bodies that have Robert’s Rules of Order and governance rules as a backup. They aren’t analogs to government or democracy.
It’s certainly possible that groups of shareholders might want to express no confidence in a CEO, and that is somewhat of a complex business. In CA v. AFSCME, the Delaware court made it clear that the board and not the shareholders run the day to day affairs of the corporation - the shareholders can propose and pass bylaws relating to governance procedures but not to substantive business decisions. The SEC imposes a process for predatory (non-binding) resolutions in proxy statements under Rule 14a-8, but I think you’d have a hard time fitting a “no confidence” resolution into what is permitted and what is not. The most popular form of “no confidence” vote is to advocate the withholding of votes for directors (with the development over the last number of years that bylaws have been amended to provide that a director needs a majority of votes cast to be elected.
The whole idea of “corporate democracy” is subject to highly divergent views, from the “director primacy” end of the continuum, which would, I think, view the term “corporate democracy” to be oxymoronic. (I’m pretty close to that view and Steve Bainbridge at UCLA would be the most active proponent of that position.). The “shareholder primacy” view tends to come not from people who are trying to manage the business on behalf of the shareholders, but from shareholders like union pension funds (AFSCME being an example), academic activists (Lucian Bebchuk being an example), governmental pensions and political players (CalPERS and the State of Connecticut Treasurer being examples), and professional gadflies (Evelyn Davis and John Chevedden being examples).
Like I said, I haven’t watched the show, but I’d be shocked if it’s worthy of serious use by a business law professor.
Posted by: Jeff Lipshaw | Aug 11, 2018 3:00:38 PM