NAME: Kem Tepnimith

CA, Inc. v AFSCME Employees Pension Plan

Answer:

1. The question of whether a bylaw regulates the process by which substantive director
decisions are made or whether the bylaw dictates the decision itself is the test that
determines whether a bylaw is a legitimate topic for shareholder action. The court
that heard this case concluded that the proposed bylaw, which demanded
reimbursement of a stockholder's proxy expenditures, governed the procedure for
choosing directors of CA and was therefore a valid topic for shareholder action. In
other words, the court found that the proposed bylaw was a proper subject for
shareholder action. This judgment was reached based on the intent and impact of
the bylaw, notwithstanding the fact that its phrasing was problematic in the sense
that it sounded like a mandate to spend corporate cash.

2. The Delaware Supreme Court determined that the proposed bylaw would restrict the
board of directors' discretion regarding the use of corporate funds, thereby violating
their fiduciary duties. The management of the corporation's business and affairs,
including the exercise of corporate funds, falls under the board's fiduciary
responsibility. By mandating that the corporation reimburse shareholders for
expenses incurred in nominating candidates for the board of directors, the proposed
bylaw would restrict this discretion. Furthermore, the court determined that the
suggested bylaw would contravene Delaware law by restricting the board's discretion
in a manner that is not permissible under Delaware law. The court concluded that
there is no Delaware statute that CA is required to comply with that would be broken
if the proposed bylaw were to be implemented. The court noted that the adoption of
the plan that calls for the expenditure of corporate funds would not, in and of itself,
render such a bylaw an unacceptable subject matter for shareholder action. The
court was referring to the fact that the proposal would require the expenditure of
corporate cash. However, the court also mentioned that the proposed bylaw must
"not be inconsistent with law" in accordance with Section 109(b) of the Delaware
General Corporation Law. The proposed bylaw was examined by the court, and it was
determined that it did not violate any provisions of Delaware law.

3. In CA, Inc. v. AFSCME Employees’ Pension Plan, the at issue was a proposed bylaw
that would have mandated CA, Inc. to provide reimbursement to shareholders for
reasonable expenses accrued during the execution of a successful proxy contest. The
Delaware Supreme Court determined that while the bylaw did not possess an
inherent invalidity, it might lead CA in violation of Delaware law if it mandated
shareholder reimbursements even in situations where such actions would be
contrary to the company's best interests. To prevent California from infringing
Delaware law, the bylaws would require an amendment stipulating that the company
is not obligated to reimburse shareholders when such action would be in opposition
to the company's best interests. A court of law or the board of directors may render
this determination.