CA, Inc. v. AFSCME Employees Pension Plan
In CA, Inc. v. AFSCME Employees Pension Plan, No. 329, 2008 (Del. July 17, 2008), the Delaware Supreme Court held that a stockholder proposed bylaw that would require the company to reimburse a stockholder's reasonable proxy expenses in event that the stockholder succeeded in having at least one director elected pursuant to a proposed short slate would violate Delaware law.
"This case involves a binding bylaw that the shareholders seek to impose involuntarily on the directors in the specific area of election expense reimbursement. Although this case is distinguishable in that respect, the distinction is one without a difference. The reason is that the internal governance contract—which here takes the form of a bylaw—is one that would also prevent the directors from exercising their full managerial power in circumstances where their fiduciary duties would otherwise require them to deny reimbursement to a dissident slate. That this limitation would be imposed by a majority vote of the shareholders rather than by the directors themselves, does not, in our view, legally matter."
