The National Conference on Public Employee Retirement Systems (NCPERS) has joined eight unions representing public and private sector workers in protesting a little noticed Delaware Supreme Court decision that in essence allows corporations to immunize themselves from investor lawsuits – eviscerating investor rights and potentially threatening the retirement security of millions who are covered by public and private pension plans.
Because Delaware is the corporate home the majority of Fortune 500 corporations, the court’s decision impacts shareholders not only across the nation, but around the globe.
In ATP Tour, Inc. et al v. Deutscher Tennis Bund, the Court held, for the first time, that the directors of a corporation may unilaterally adopt immunity-granting bylaws requiring all investors who bring suit against a corporation to be personally liable for all of a corporation’s legal expenses – unless an investor is entirely successful on virtually every claim alleged. Even when an investor is successful on most but perhaps not all counts alleged, that investor still faces substantial financial liability to the wrongdoers. So even when an investor wins, the investor loses.
In the wake of the May 2014 ATP Tour decision, at least 34 additional corporations have adopted bylaws that are identical or even more extreme. Even in cases involving undeniable violations of federal and/or state law, no responsible investor can risk facing this type of uncontrollable and unpredictable financial exposure.
Pension plans are among the largest and most active institutional investors. Approximately 70 percent of the typical public pension plan’s funding comes from investment returns. As shareholders, pension plans must ensure the integrity of their investments. But as fiduciaries, pension plans cannot expose their capital – and their beneficiaries – to unreasonable financial risk.
Today, NCPERS and its labor coalition partners* sent a letter to Delaware Gov. Jack Markell demanding swift action to restore shareholder rights and to prevent corporations, their directors and their officers from immunizing themselves from accountability to their shareholders. To leave the Court’s decision intact would not only damage confidence in Delaware’s corporate law. It would deprive investors of the crucial protections of our nation’s securities and corporate governance laws.
The National Conference on Public Employee Retirement Systems (NCPERS) is the largest trade association for public sector pension funds, representing more than 550 funds throughout the United States and Canada. It is a unique non-profit network of public trustees, administrators, public officials and investment professionals who collectively manage more than $3 trillion in pension assets. Founded in 1941, NCPERS is the principal trade association working to promote and protect pensions by focusing on advocacy, research and education for the benefit of public sector pension stakeholders.
*American Federation of Labor and Congress of Industrial Organizations (AFL-CIO)
*American Federation of State County and Municipal Employees (AFSCME)
*American Federation of Teachers (AFT)
*Delaware State American Federation of Labor and Congress of Industrial Organizations (AFL-CIO)
*International Brotherhood of Electrical Workers (IBEW)
*National Education Association (NEA)
*Service Employees International Union (SEIU)
*United Food and Commercial Workers International Union (UFCW)
Source: Business Wire