Publications

The Permissible Scope of Bylaws: CA, Inc. v. AFSCME Employees Pension Plan

Fall 2008
Marc Weingarten | William F. Cassin
Activist Investing Developments - Fall 2008

There are surprisingly few actions that stockholders, including activist stockholders, can take directly to influence corporate governance at the company they own. Most significantly, they lack the power to amend the company’s charter on their own initiative, as charter amendments must first be declared advisable by the board in order to be considered by the stockholders. Their most powerful right, of course, is to elect directors, though even this right may be substantially circumscribed through staggered-board provisions and the elimination of the right to take action by consent or to call a special meeting, as well as the application of advance notification bylaws. One of the stockholders’ few other powerful rights is to adopt or amend bylaw provisions. Section 109(a) of the Delaware General Corporation Law (the “DGCL”) in effect provides that “both the board and the stockholders, independently and concurrently, possess the power to adopt, amend and repeal the bylaws.” However, even this power is not absolute.