Tuesday, February 17, 2009
With last week's Limerick, we covered a case that teaches us that a shareholder has a right to inspect a corporation's books and records, including shareholder lists, in the context of a tender offer. State laws, including Section 220 of Delaware's General Corporation Law, provide that a shareholder has inspection rights subject only to the requirement that the shareholder show that she seeks inspection for purposes related to the business of the firm.
In Pilsbury, plaintiff was a member of Project Honeywell, an antiwar group that was trying to get the corporation to stop producing fragmentation bombs for use during the Vietnam War. Pilsbury bought shares in Honeywell so that he could lobby its shareholders on the subject of fragmentation bombs. He said in deposition that his only reason for investing in the company was to call attention to Honeywell's fragmentation bomb production. The court found that his purpose in seeking inspection related to his political views and not to the firm's business. Accordingly, he was denied the right to inspect under Delaware law.
So now, savvy politically-motivated investors know that they have to say in their depositions that they love the corporations that they are seeking to expose, and believe that manufacturing savage weapons is bad for business.
Pilsbury v. Honeywell, Inc.
Pilsbury protests Vietnam
Honeywell could not give a damn.
If he'd only lied,
He'd have not been denied!
Is Section 220 a sham?!?