Open season for board minutes.

• Author: Ninck, Elizabeth
• Position: Board practices

PREPARING FOR HIS then-planned (and since suspended) proxy battle to control Time Warner Inc., corporate financier Carl Icahn demanded to see board minutes discussing the possible split-up of Time Warner's businesses. Former chairman Steve Case paved the way for the request when he revealed in a Washington Post editorial that, well before Icahn took a big stake in the company, the board had disagreed about whether to "integrate or liberate" Time Warner's discrete business units. "Sunlight must be shed on the board's deliberations," responded Icahn.

Most companies are reluctant to turn over these documents, citing confidentiality and other concerns. Requests like these often end up in litigation. Could Icahn have gotten what he wanted?

* Shareholders' Right to Inspect: Under Delaware corporate law, which applies to Time Warner and many other public companies, shareholders have the right to inspect and copy corporate records, including board minutes, "for any proper purpose." In fact, Delaware courts encourage this procedure, set forth in Section 220 of Delaware corporate law, as an information-gathering tool, and have rebuked shareholders for failing to use it before filing a claim of corporate mismanagement

To obtain corporate records, a shareholder must make a written demand to the company, stating a purpose that is "reasonably related" to his or her interest as a stockholder. An investigation into alleged mismanagement can meet this standard. But if the demand is challenged, the shareholder must demonstrate a credible basis for a court to infer that mismanagement occurred. Courts suggest that the purpose of the shareholder's investigation into wrongdoing need not be to file a claim and could be "to seek an audience with the board to discuss proposed reforms or ... mount a proxy fight to elect new directors."

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* But "No Fishing": Section 220 does not give shareholders the right to see every record they...