Update on the ND law

The WSJ reports today on action regarding the ND experiment to offer firms corporate governance provisions that are supposedly more pro-shareholder than traditional corporate laws in Delaware and elsewhere:  

[S]hareholders at four companies are offering resolutions urging those companies to reincorporate in North Dakota. Experts say the proposals, while unlikely to pass, could lead to pressure for more shareholder-friendly corporate-governance rules in other states. John Chevedden, a longtime activist investor in California, filed a proposal urging Oshkosh Corp. to move its incorporation to North Dakota from Wisconsin. Mr. Chevedden also helped shareholders at Hain Celestial Group Inc., Whole Foods Market Inc. and PG&E Corp. draft and file similar proposals.

* * * "This is more a wake-up call for Delaware to modernize than any significant attempt to attract business in North Dakota," says Richard Ferlauto, head of corporate governance and pension investment at the American Federation of State, County and Municipal Employees.

About a year and a half ago I discussed the law on the Harvard Corporate Governance Blog. I argued that even if companies wanted these provisions they'd be reluctant to forsake Delaware’s courts, that firms don’t need Iowa’s law to adopt these reforms, and, anyway the firms probably don’t want the reforms. I concluded: "In short, the ND experiment is less interesting than it may seem."

I offered these views to the WSJ reporter, who called me for comment.  I added, on the bigger question of whether these “pro-shareholder” reforms were a good idea, that the unions and similarly-minded activists that were pushing them did not necessarily represent the interests of shareholders generally.

However, such skeptical views did not make it into the story.  The reporter evidently didn’t want this rain on the story’s parade.

Comments

[eschapp]

You can't blame ND for trying to increase revenue. It was worth a try. As a displaced N. Dakotan and a law student taking Business Associations, it was rather fun to see ND taking on DE. It at least put ND on the map for something other than snow or floods for a week.

I wrote about this last week, and needless to say I didn't see a flood of business flying towards the Flickertail state anytime soon.

Thank you for the behind the scenes look at the WSJ article.