Settling with Activist Investors and directors´Fiduciary Duties.

When interacting with activist investors, boards (should not we say shareholders?) often grant them some board seats in exchange for their proxy fight withdrawal. According to Neil Whoriskey, (1) this exchange means handing over something valuable, which will lead Delaware courts to apply the Unocal test, as this should be considered a defensive device, (like a poison pill, greenmail, etc). According to the Unocal test, directors detecting a threat to corporate policy or effectiveness, and introducing a proportional and reasonable defensive measure, would be granted the fit with their fiduciary duties.

The author considers the questions and certainties boards should make and have before granting partial control ot the company to a third party, in regard to the different duties.