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Can Shareholders Nominate Placeholder Directors to the Board?

Williams Faces Takeover Attempt from Shareholder Corvex

Tulsa-based energy company Williams is facing a corporate takeover attempt by one of its biggest shareholders, the hedge fund Corvex Management, Fortune reports. Keith Meister, the head of Corvex, wants to replace the entire board of Williams with his own employees. His plan is to have those employees step down in favor of more qualified recruits once he can find them. The unusual step is the latest in a turbulent series of management and ownership shakeups for the Oklahoma oil and gas company. These types of legal issues are normal parts of corporate business law

Corvex Has Pushed for Change at Williams

Meister has disagreed with a number of key decisions by the Williams leadership over the last year. He was disappointed when Williams did not negotiate actively with their rival Enterprise Products Partners when that company approached Williams with buyout overtures. Corvex and another major Williams shareholder Soroban Capital Partners had pushed Williams to sell out to another rival, Energy Transfer Equity LP. After this deal fell apart, nearly half of the Williams board resigned.

Meister’s Placeholders Could Sidestep Director Notice Bylaws

The Wall Street Journal explains a possible motive for Meister’s unusual strategy of naming employees to the board who will then resign. He had to name his candidates for the board by this past Thursday, August 25, in order to comply with Williams’ corporate bylaws requiring advanced notice of candidates. This move buys Meister time to find new recruits to replace the board. Once he finds the new recruits, his employees can name them to the board and resign.

Other Companies May Rewrite Bylaws to Avoid Placeholder Directors

This new and untested tactic may face legal challenges, though. Williams’ current leadership may argue that the bylaw is intended to give notice to shareholders of the identity of the director who will actually serve, not a placeholder who will name someone else and step down. If it works, other companies will be changing their bylaws to prevent this corporate takeover strategy. They may even seek legislation in particular states to outlaw this tactic, just as Chesapeake Energy got a law passed in Oklahoma requiring staggered board elections to prevent takeovers.

Find a Law Firm You Can Trust

If you are a business owner or you deal with the logistics of your business, you need a law firm that can handle the full range of your company’s legal needs. Get in touch with The Bassett Law Firm. We have experience helping large corporations and negotiating high-level business moves. We serve the areas of Arkansas, Missouri, and Oklahoma. Call us today at 479-521-9996 to schedule a consultation with our team.