Opinion ID: 1934995
Heading Depth: 1
Heading Rank: 36

Heading: Subjective Determination

Text: The subjective premise was the Court of Chancery's sua sponte determination that Unitrin's outside directors, who are also substantial stockholders, would not vote like other stockholders in a proxy contest, i.e., in their own best economic interests. At American General's Offer price, the outside directors held Unitrin shares worth more than $450 million. Consequently, Unitrin argues the stockholder directors had the same interest as other Unitrin stockholders generally, when voting in a proxy contest, to wit: the maximization of the value of their investments. In rejecting Unitrin's argument, the Court of Chancery stated that the stockholder directors would be subconsciously motivated in a proxy contest to vote against otherwise excellent offers which did not include a price parameter to compensate them for the loss of the prestige and perquisites of membership on Unitrin's Board. The Court of Chancery's subjective determination that the stockholder directors of Unitrin would reject an excellent offer, unless it compensated them for giving up the prestige and perquisites of directorship, appears to be subjective and without record support. It cannot be presumed. It must be the subject of proof that the Unitrin directors' objective in the Repurchase Program was to forego the opportunity to sell their stock at a premium. In particular, it cannot be presumed that the prestige and perquisites of holding a director's office or a motive to strengthen collective power prevails over a stockholder-director's economic interest. Even the shareholder-plaintiffs in this case agree with the legal proposition Unitrin advocates on appeal: stockholders are presumed to act in their own best economic interests when they vote in a proxy contest.