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Wachtell Lipton’s Errors on Shareholder-Paid Director Bonuses

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5 Responses

  1. AF says:

    I missed it, where does Wachtell say these schemes are legal?

  2. Lawrence Cunningham says:

    AF: Sorry you missed it; I hoped it would be understandable to ordinary readers (e.g., not to lawyers only).

    Wacthell’s 8 lawyers wrote a 2-page memo about the topic. It is linked in the post (and the firm circulated it widely).

    After describing the schemes in abstract terms, with various pejorative labels, the memo said they are “egregious” and posed assorted “threats.” It then said Delaware boards could, by statute alone, unilaterally adopt bylaw amendments addressing them. (That is incorrect, as the post explains.)

    My post says that the Wachtell memo “concurs with my view that the schemes are lawful,” which would be obvious to trained lawyers though perhaps not to lay people; had Wachtell found them illegal, it would have said so, rather than calling them “egregious” or “threatening” and then concocting the (erreonous) bylaw amendment route.

  3. AF says:

    Professor Cunningham: I apologize if I was unclear. I read the memo; I meant that I missed the part where Wachtell concurs with your view that the schemes are lawful.

    I disagree that it would be “obvious to trained lawyers” that Wachtell concurs with your view that the schemes are lawful simply because it does not say that they are unlawful. To be sure, I would agree with a weaker version of your reasoning: I would agree that had Wachtell found these schemes *clearly* unlawful, it probably would have said so. But it strikes me as quite plausible that Wachtell chose not to address the lawfulness of these schemes not because it affirmatively believes they are lawful, but rather because it sees their lawfulness as a difficult question which (in Wachtell’s view) can be avoided by adoping its proposal.

  4. Lawrence Cunningham says:

    Interesting possibility.

  5. Anon says:

    Revealed today that Wachtell was representing Hess in the pending proxy fight where this question came up, though its memo never mentions that important fact!

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