Do Directors Have the Right To Be Wrong?

I`m frustrated by our cover story. Not with the story itselfu00e2u20ac”I think John Engen did a great job of covering the complex events that surrounded North Fork`s spurned hostile takeover attempt. I`m frustrated that no one from Dime Bancorp would talk with us about their side of the story. I want to know if they rejected North Fork`s offer because they were “well informed” (good response), didn`t like the price (acceptable response), or followed management`s lead without being informed or considering shareholders` views (bad response). In fairness to CEO Toal and the Dime board, we don`t know the answer to that question. And while it`s true that time will tell, it`s unfortunate that we can`t garner clearer lessons about boards` duties from this event. This has driven me to send the following e-mail to the judges in the Delaware courts with copies to bank boards and shareholders. To Whom It May Concern: Here are some simpler corporate laws that need to be integrated into the legal statues for corporate boards.

The “Rights” Law

u00e2u20ac”This is actually a three-part law that simplifies the rights of both board members and shareholders.

  • The board is elected by the shareholders and has the authority to act prudently on issues in the best interest of the corporation.
  • The shareholders have the right to replace directors who they feel are not acting in the best interests of the corporation.
  • When shareholders formally vote on an issue and a board ignores their majority opinion, there should be an accelerated procedure for replacing the board as quickly as possible.

Board Recision Law

u00e2u20ac”If banks give consumers a period of time to reverse a misguided financial decision, then certainly a board completing an important vote should have a similar tool. This law is important when boards realize that they may have acted in haste or without being fully informed and want to rethink their decision before suffering the consequences or resorting to expensive legal maneuvers to save face.

If You Snooze You Lose Law

u00e2u20ac”If a board does not participate in and/or understand the company`s direction and the benefits to constituents of that direction, then no legal maneuvering in the world should protect that group from being held responsible, liable, or from being replaced.Thank you in advance for your consideration.One very positive event coming out of our cover story is that North Fork CEO John Kanas has accepted our invitation to speak at Bank Director`s annual Acquire or Be Acquired mergers and acquisitions conference. This year`s event will be held on February 25-27 at the Hyatt Gainey Ranch in Scottsdale, Arizona. Joining Mr. Kanas at the conference will be Mitchell Caplan, chief banking officer of E-Trade Bank, along with a host of investment bankers, M&A experts, and financial institution executives eager to share their experiences and knowledge. By the way, we would love to have someone from Dime Bancorp speak as well, but they won`t return our phone calls.

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