Public companies face the risk of litigating the same (or substantially similar) claims in multiple jurisdictions, arguably consuming valuable financial and human resources. Exclusive forum bylaws (also referred to as exclusive venue or forum selection provisions) generally provide that a certain state, typically the company’s state of incorporation, must be the exclusive forum for all intra-corporate disputes. Although companies adopting such bylaws (or articles of incorporation provisions) argue that exclusive forum bylaws reduce litigation costs and increase the outcome predictability of certain litigation, some shareholders and corporate governance advocates counter that the bylaws inappropriately limit shareholders’ fundamental right to pursue certain legal remedies.
This corporate governance update (1) provides general information concerning exclusive forum bylaws (including a synopsis of arguments in support of and against them), (2) summarizes the exclusive forum policies and practices of several of the largest asset managers and public pension funds, select proxy advisory firms and certain corporate governance advocates, and (3) presents other related considerations to facilitate boardroom and C-suite discussion.
This Corporate Governance Quarterly Update was republished by Insights: The Corporate & Securities Law Advisor in its October 2015 issue. Click here to read the republished article.