Shareholder Primacy – Podcast Summary

Episode: Another controller lawsuit; proxy advisors and exec comp
Date: March 11, 2026
Hosts: Mike Levin (activist investor), Ann Lipton (Professor of Law, University of Colorado)
Produced by: Free Float Media Inc.

Overview

In this episode, Ann and Mike delve into two significant and timely topics at the intersection of securities law, activist investing, and corporate governance:

• A detailed analysis of a recent Delaware Chancery Court decision involving EngageSmart—a controlled company take-private transaction rife with process flaws, banker drama, and the convoluted application of shareholder "cleansing" under Delaware law.
• An exploration of why proxy advisors like ISS and Glass Lewis are persistently under fire from corporations and their lobbyists, with a focus on the controversial nature of executive compensation recommendations.

The discussion is characteristic of the hosts: lively, deeply informed, and punctuated by anecdotes and sharp observations.

Key Discussion Points and Insights

1. Delaware Chancery Court’s EngageSmart Decision

Background of the Case ([00:37]–[06:29])

• EngageSmart, a company controlled (60% voting power) by private equity firm General Atlantic, was taken private in a transaction triggered by General Atlantic's need for liquidity but desire to retain control.
• The structure: Find a buyer who'd cash out public shareholders (and some of GA's shares) yet leave GA in control. This limited buyer options, as most bidders want control if they're paying big.
• BANKER DRAMA: Goldman Sachs (company/GA's advisor) and Evercore (special committee’s advisor) were locked in a "middle school status competition," with Goldman trying to sideline Evercore ([03:26] B).
  • Quote (Ann, paraphrasing Laster): "Goldman basically tried to muscle Evercore out of the way, which Laster called a middle school status competition." ([03:26])
• Eventually, Vista Equity Partners was given inside track, received special treatment, and then shifted its bid to seek control—contradicting GA’s prior stance. With public shareholders thus functionally excluded, a deal is struck (Vista and GA split the spoils, including a $500 million dividend to GA post-close).

Legal Considerations ([06:29]–[11:57])

• Plaintiffs (public shareholders) sued, alleging breach of fiduciary duty all around—the board, General Atlantic, Goldman, and Vista.
• The suit was filed before Delaware's new cleansing statute SB21; thus, the older, stricter MFW regime applies.
  • Under MFW: "Requires the independent board to negotiate and approve the deal, and the disinterested shareholders to approve it." ([07:25] B)
• The Chancery Court (Vice Chancellor J. Travis Laster) found the proxy given to shareholders was insufficiently informative:

  • Did not disclose how liquidity needs/GA's position shaped the process

  • Omitted critical banker conflicts (Goldman was advising both Vista and GA elsewhere)

  • Understated special committee’s isolation and the elimination of alternative bidders

  • Result: Shareholder approval wasn’t “informed” → deal not cleansed → entire fairness review is required.

  • Quote (Ann): “The proxy didn’t adequately disclose how much General Atlantic’s liquidity needs were driving the process.” ([10:00])

  • Quote (Ann): “He found that the proxy statement was not sufficient and then he also said he was going to sustain claims against Goldman for aiding and abetting the breaches of duty.” ([11:57])

Aiding and Abetting Liability for Bankers ([11:57]–[15:02])

• Unusual for a court to keep bankers (Goldman Sachs) on the hook for aiding and abetting fiduciary breaches; usually, only acquirers or board members are so exposed.
• Laster distinguished that advisors to the board (like Goldman) who manipulate the process for a favored bidder or exclude the special committee’s advisor can be liable, since the board relies on their unconflicted advice.
  • “When Goldman refused to cooperate with Evercore...Goldman impeded Evercore’s ability to counsel the special committee, which Laster found was part of why he found aiding and abetting of breach of fiduciary duty.” ([14:13] B)

Procedural and Future Implications ([15:23]–[25:40])

• The case advanced past the motion to dismiss—meaning there will be discovery and trial, unless settled.

• Although it’s under pre-SB21 law, Laster’s reasoning could influence future SB21 cases.

  • SB21 drafters intentionally inserted loopholes; one is a lower standard for what shareholders must be told before cleansing votes ([16:22]).

• The opinion serves as a “plaintiff’s roadmap” to insist that full process disclosure is required for shareholder cleansing, even though SB21’s language may suggest otherwise.

  • Quote (Ann): “The statute just says shareholders have to be informed. They don’t. It’s very vague.” ([21:26] A, [21:27] B)
  • Quote (Ann, summing up): “Even under SB21, a shareholder can’t be informed unless they have all this information.” ([23:00] B)

Philosophical/Motivational Wrap-up ([23:12]–[25:40])

• Even if most shareholders won’t vote down a premium-generating deal, requiring full disclosure disciplines boards and advisors preemptively.
  • Quote (Ann): “If boards know they have to disclose this stuff, they are less likely to do it [engage in conflicted deals] potentially.” ([25:14])

2. Why Are Proxy Advisors So Controversial—Is Exec Comp the Real Reason? ([26:49]–[41:47])

The Attacks on Proxy Advisors ([26:49]–[29:13])

• Ongoing legislative and regulatory attacks on proxy advisors (ISS, Glass Lewis) are not instigated by shareholders (who are clients) but by company management and their representatives.
  • Quote (Mike): “It got me wondering what really is happening here? Because a lot of this is motivated by, really by companies. It’s fair to say that shareholders, their clients love them... So clearly it’s companies and their representatives and their lobbyists.” ([26:49]–[29:13])

What Actually Bothers Companies? ([29:13]–[36:10])

• Hypothesis: Though proxy advisors annoy companies in several ways (ESG proposals, proxy contests, routine director recommendations), only executive compensation really matters enough to prompt such aggressive pushback.

  • ESG: Only a handful of large, consumer-facing companies are regularly targeted, proposals are non-binding, and pass rates are low ([31:25] A, [31:28] B).

  • Proxy contests: Rare (30–40/year); ISS/Glass Lewis are balanced in their recommendations.

  • Routine elections: Proxy advisors recommend "for" almost all directors in uncontested votes (>90% support).

  • Executive Compensation: Every company, every year. Benchmarking, independent peer groups, transparency, and the possibility of a negative "Say on Pay" recommendation pierces right to the CEO and board’s pride—and triggers real consequences.

    • Quote (Mike): “I can’t think of a more sensitive subject to a CEO than how much they’re getting paid.” ([36:10])

Ann’s Counterpoints and Additions ([37:33]–[41:47])

• Ann notes companies also get irritated by proxy advisor conclusions that certain board members aren’t truly “independent” (which has knock-on effects for legal and governance purposes), and the ability of proxy advisors to reinforce the impact of successful precatory proposals (by withholding board support next year if ignored).
  • “Boards care because if they get a precatory proposal and shareholders vote in favor of it and they ignore it, then the proxy advisors the next year will start recommending against board nominations. Proxy advisors are the enforcement arm of the precatory proposals.” ([39:03] B)
• Boards may also be skeptical that shareholders’ pro-ESG votes "really reflect shareholder views" as opposed to “performance” or PR, leading to further resentment ([39:47] B).

Conclusion/Reflection ([41:47]–[42:10])

• Mike is curious to hear more evidence and feedback for (or against) his theory that executive compensation scrutiny is at the heart of corporate animosity toward proxy advisors.

Notable Quotes & Memorable Moments

| Timestamp | Speaker | Quote/Paraphrase | |-----------|---------|------------------| | 03:26 | Ann (paraphrasing Laster) | "Goldman basically tried to muscle Evercore out of the way, which Laster called a middle school status competition." | | 09:28 | Ann | "I mean, you know, the various chancellors, they take pride. He [Laster] really kind of, like, has some really, really good language." | | 10:00 | Ann | “The proxy didn’t adequately disclose how much General Atlantic’s liquidity needs were driving the process.” | | 11:57 | Ann | “He found that the proxy statement was not sufficient and then he also said he was going to sustain claims against Goldman for aiding and abetting the breaches of duty.” | | 14:13 | Ann | “When Goldman refused to cooperate with Evercore...Goldman impeded Evercore’s ability to counsel the special committee, which Laster found was part of why he found aiding and abetting of breach of fiduciary duty.” | | 21:27 | Ann | “It’s very vague.” (re: SB21's disclosure standard for shareholder cleansing votes) | | 23:00 | Ann | “Even under SB21, a shareholder can’t be informed unless they have all this information.” | | 25:14 | Ann | “If boards know they have to disclose this stuff, they are less likely to do it potentially.” | | 36:10 | Mike | “I can’t think of a more sensitive subject to a CEO than how much they’re getting paid.” | | 39:03 | Ann | "Proxy advisors are the enforcement arm of the precatory proposals." |

Important Timestamps

• 00:37–06:29: EngageSmart case background and process overview
• 06:29–15:02: Legal standards (MFW, cleansing), banker liability, and Laster’s reasoning
• 15:23–25:40: Forward-looking implications for Delaware law (SB21), disclosure, and shareholder empowerment
• 26:49–36:10: Discussion: Corporate hostility toward proxy advisors—ESG, board recommendations, proxy fights, exec comp
• 36:10–41:47: Deeper dive on proxy advisor power, independence disputes, and why boards care about precatory proposals
• 41:47–end: Wrap-up and calls for feedback

Flow and Tone

• The episode features fast-paced, smart banter between the hosts—with Ann providing legal clarity and sharp analyses, and Mike offering the investor/activist’s nuanced perspective.
• The tone is expert but accessible, occasionally witty, and always respectful of the complexity of the topics.

Takeaway

Listeners are treated to an in-depth look at why take-private deals, banker conflicts, and shareholder disclosure standards still matter deeply in modern corporate governance. The EngageSmart case reveals that process flaws can bring real legal and reputational peril, even with the latest legal reforms looming.

Meanwhile, the unresolved war over proxy advisors is less about politics or activism, and more about the unvarnished reality that CEOs and directors don’t like outside accountability—especially when it comes to their own paychecks.

If you’re in the fields of securities law, activist investing, or corporate governance, this episode is a must-listen for understanding 2026’s legal and financial battlegrounds.