Vale Distinguished Lecture Considers Constituency Directors
Web Editor - Published: March 18, 2014

Simon M. Lorne delivers the Distinguished Scholar Lecture at the 26th Annual Ruby R. Vale Interschool Corporate Moot Court Competition.

“It’s unrealistic to expect constituent directors not to look at the constituency they were elected to represent,” said Simon M. Lorne, the vice chairman and chief legal officer of hedge fund management company Millennium Management LLC, as he delivered the Distinguished Scholar Lecture at the 26th Annual Ruby R. Vale Interschool Corporate Moot Court Competition on Friday, March 14th.

Each year, the Distinguished Scholar Lecture plays an integral part in the Ruby R. Vale Interschool Moot Court Competition. In addition to the lecture, the Distinguished Scholar serves as one of the judges for the final round of the competition.

Lorne’s remarks, titled “Constituency Directors and the Objects of Their Attention,” focused on issues related to representative directors and considerations related to the investors who elected them versus their fiduciary duty to the company as a whole and all of its stockholders. Lorne noted that it spoke well of Delaware corporate law in general that the issue has not perhaps become as prevalent as it could.

Lorne traced some of the case law related to the issue, including the Michigan Supreme Court’s decision in 1919’s Dodge v. Ford Motor Company that is often cited as an example of the primacy of “shareholder value.” He also touched on the Delaware Court of Chancery case Air Products & Chemicals, Inc. v. Airgas, Inc. noting that despite the fact that Air Products & Chemicals placed three directors on the Airgas board during a proxy contest that those three directors twice voted with other Airgas directors to reject buyout offers deemed to undervalue Airgas.

He also discussed situations in which a director representing a union or a company’s employees might be elected to a board. He suggested that there are obvious downsides to suggesting that such directors should not attempt to represent their constituents.

Simon M. Lorne received a J.D. magna cum laude from the University of Michigan Law School at Ann Arbor. A frequent speaker and lecturer, he has taught at the University of Pennsylvania, University of Southern California, and New York University law schools. Since 1999 he has been co-director of Stanford Law School's Directors' College. He previously served asa partner with Munger Tolles & Olson, LLP and served as a Managing Director, with responsibility for Legal Compliance and Internal Audit of Citigroup/Salomon Brothers and as the General Counsel at the SEC in Washington, D.C.