Welcome to the Boardroom Governance Podcast. I’m your host, Evan Epstein. In this episode, I talk with Anat Alon-Beck, a professor at Case Western Reserve University School of Law. Her research focuses on corporate law and governance, including how legal and regulatory structures influence the shift in equities from public markets to private markets, and the rise of “unicorn” firms. In this podcast, we talk about one of the latest practices in unicorn companies compelling employees, who are not yet stockholders, to waive their stockholder inspection rights under Delaware General Corporation Law (Section 220) as a condition to receiving stock options from the company. We discuss some cases such as DOMO, Good Technology and JUUL, plus other corporate governance trends in venture-backed companies such as super-voting shares, FF preferred stock, and fiduciary duties of directors in private companies. If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media. You can find all the show notes on the website boardroom-governance.com and please feel free to subscribe to the Boardroom Governance Newsletter at evanepstein.substack.com
0:00 Intro.
1:18 Start of interview
2:01 Anat's "origin story". She grew up in Israel. She practiced corporate law, VC fund formation, startup representation and M&A in Israel before moving to the U.S.
7:03 Her academic focus at Case Western Reserve University School of Law (Cleveland, Ohio).
9:12 On the practice of compelling employees, who are not yet stockholders, to waive their stockholder inspection rights under Delaware General Corporation Law (Section 220) as a condition to receiving stock options from the company. Based on her paper Bargaining Inequality: Employee Golden Handcuffs and Asymmetric Information, triggered by this WSJ article on the DOMO case.
20:42 Her hand-collected data set consisting of the SEC’s public filings finding that many firms began requiring that their employees sign a waiver clause titled “Waiver of Statutory Information Rights” post Domo (there was a "huge uptick"). NVCA's model legal documents including this waiver clause in its Investors' Rights Agreement.
27:58 The Good Technology (2018) and JUUL Labs, Inc. v. Grove (2020) cases. Description of classic conflicts of interest in venture-backed companies. Discussion of the "internal affairs doctrine".
37:35 On dual fiduciaries and "new" conflicts by founders with other common stockholders (prompted by super voting shares, multiple board votes, ff preferred stock, etc). The Trados case. Fiduciary duties of venture-backed company directors. On the shift of control from VCs (preferred stockholders) to founders. "Bargaining power is the key."
54:32 Take-away thoughts for directors of venture-backed companies. Lawyers as gatekeepers.
58:06 The 1-3 books that have greatly influenced her life:
59:34 - Who were your mentors, and what did you learn from them?
1:00.48 - Are there any quotes you think of often or live your life by? "Be the change that you want to see in the world" "I've always been an activist and that's the mantra that I live by."
1:01:28- An unusual habit or an absurd thing that she loves: Fricasse (Tunisian sandwich), working out.
1:02:02 - The living person she most admires: Prof. Jill Fisch (Penn Law).
Anat Alon-Beck is an Assistant Professor of Law at Case Western Reserve School of Law. Her research examines how legal and regulatory structures influence the shift in equities from public markets to private markets, and the rise in the number of “unicorn” firms.
__
You can follow Evan on social media at:
Twitter: @evanepstein
LinkedIn: https://www.linkedin.com/in/epsteinevan/
Substack: https://evanepstein.substack.com/
__
Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License