Opinion ID: 2275517
Heading Depth: 1
Heading Rank: 10

Heading: Corporate Governance Principles

Text: The most fundamental principles of corporate governance are a function of the allocation of power within a corporation between its stockholders and its board of directors. [5] The stockholders' power is the right to vote on specific matters, in particular, in an election of directors. The power of managing the corporate enterprise is vested in the shareholders' duly elected board representatives. [6] Accordingly, while these fundamental tenets of Delaware corporate law provide for a separation of control and ownership, [7] the stockholder franchise has been characterized as the ideological underpinning upon which the legitimacy of the directors managerial power rests. [8] Maintaining a proper balance in the allocation of power between the stockholders' right to elect directors and the board of directors' right to manage the corporation is dependent upon the stockholders' unimpeded right to vote effectively in an election of directors. This Court has repeatedly stated that, if the stockholders are not satisfied with the management or actions, of their elected representatives on the board of directors, the power of corporate democracy is available to the stockholders to replace the incumbent directors when they stand for re-election. [9] Consequently, two decades ago, this Court held: The Courts of this State will not allow the wrongful subversion of corporate democracy by manipulation of the corporate machinery or by machinations under the cloak of Delaware law. Accordingly, careful judicial scrutiny will be given a situation in which the right to vote for the election of successor directors has been effectively frustrated and denied. [10] This Court and the Court of Chancery have remained assiduous in carefully reviewing any board actions designed to interfere with or impede the effective exercise of corporate democracy by shareholders, especially in an election of directors. [11]