The "Gimlet Eye" and Shareholder Voting

Harvard Law School Forum on Corporate Governance and Financial Regulation

Gregory Beaman co-authored an article on a recent Delaware Chancery Court decision that preliminarily enjoined the directors of Cogentix Medical from reducing the size of the company’s board because, under the facts presented, there was a reasonable probability that the board reduction plan was implemented to defeat insurgent candidates in a contested director election.

According to the authors, "The decision is a reminder that board actions that affect the shareholder vote—particularly decisions that make it more difficult for stockholders to elect directors not supported by management—will be subject to enhanced judicial scrutiny by Delaware courts on the lookout with a 'gimlet eye' for conduct having a preclusive or coercive effect on the stockholder vote."