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50 J. Corp. L. 1 (2024-2025)

handle is hein.journals/jcorl50 and id is 1 raw text is: The Corporate Contract & The Private Ordering of Shareholder Proposals Mohsen Manesh* Should Coca-Cola do more to protect abortion rights? Should Mastercard track gun purchases? Should Disney's workplace DEI trainings be more sensitive to conservative perspectives? Under Exchange Act Rule 14a-8 (the Rule), an activist holding only a nominal stake in apublic corporation is able toforce a shareholder vote on such proposals, focusing attention on whatever hot-button issue they wish to spotlight. Today, activists pepper corporations with politically divisive proposals in record numbers. While left-leaning groups, organized under the ESG banner, target corporations with proposals focused on progressive priorities, right-leaning outfits submit competing proposals, seeking to undermine ESG initiatives and urging afocus on corporate profits. Caught in the crossfire areAmerica's largest businesses. Corporate leaders complain that these divisive proposals are costly distractions, and average investors have shown little enthusiasm for them. This Article offers corporate America a path out ofthis morass. Under Delaware law, which governs most public companies, a corporation's charter and bylaws represent a binding contract between the corporation and its shareholders. Moreover, Delaware law affords broad freedom in the corporate contract to regulate shareholders' governance rights, including the right to make or vote upon a proposal at a shareholder meeting. And because a shareholder's access to the Rule is itself dependent on these state-law rights, a provision in the corporate contract restricting shareholder proposals is not preempted by the Rule or the Exchange Act. Importantly, not every public company may want to restrict shareholder proposals through private ordering. The risk ofpolitical backlash, resistance among investors, and other practical considerations may lead some, perhaps most, companies to leave share- holder proposal rights untouched. At the same time, the opportunity to escape the SEC's unpredictable no-action process, in favor of adjudicating shareholder-proposal disputes before the sophisticated and politically insulated courts of Delaware, could prove tempt- ing. Different companies will weigh these considerations differently. Through private or- dering, each corporation may tailor shareholder proposal rights to best meet its needs, and securities markets may efficiently price those rightsfor the benefit of investors. * L.L. Stewart Professor of Business Law, University of Oregon School of Law. The author is immensely grateful to Andrew Winden, Joseph Grundfest, Kevin Tu, Sean Griffith, and Bernard Sharfman for the insights and comments to earlier drafts of this Article.

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