Smart contracts are self-executing transactions that are written in computer code often utilized to “facilitate, execute, and enforce agreements between two or more parties.” While the term might sound new to some, the phrase was actually coined in 1994. The concept behind a smart contract is rooted in basic contract law; offer, acceptance, and consideration are all necessary, but smart contracts are enforced by different means. A key advantage of using smart contracts is efficiency. Once uploaded to the blockchain, smart contracts do not rely on a third party for recordkeeping or enforcement. Because they are self-executing and stored on a shared platform, smart contracts could potentially eliminate the manual effort currently necessary to execute domestic and international financial transactions.

In Ford Motor Company., 2018 BL 424 (Jan. 2, 2018), Ford Motor Company (“Ford”) asked the staff of the Securities and Exchange Commission (“SEC”) for permission to exclude a shareholder proposal submitted by Martin Harangozo (“Shareholder”) requesting that Ford issue a report outlining the costs and benefits of feeding its employees, specifically regarding the effects on employee health, productivity, and company profitability. The SEC issued the requested no action letter allowing for the exclusion of the proposal under Rule 14a-8(i)(7).

In Schaffer, et al. v. Horizon Pharma PLC, et al., No. 16-CV-1763 (JMF), 2018 BL 16225 (S.D.N.Y. Jan. 18, 2018), the Southern District of New York dismissed the claims brought by a class of plaintiffs (“Plaintiffs”) against Horizon Pharma PLC (“Horizon”), a number of Horizon’s executives (“Individual Defendants”), and various underwriters (Horizon, Individual Defendants and the underwriters, collectively “Defendants”). The complaint alleged Horizon and Individual Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and Rule 10b-5 thereunder, and Defendants violated Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as amended (“Securities Act”). The court held Plaintiffs’ complaint only gave conclusory statements and insufficient facts to establish securities fraud or scienter and dismissed the complaint.

This post is part of an ongoing series that examines the way stock exchange independence rules relate to director compensation. We are for the most part including companies from 2017’s Fortune 500 and using information found in their 2017 proxy statements.

NASDAQ and the NYSE have similar rules with respect to director independence. NYSE Rule 303A.01 requires that each listed company’s board of directors be comprised of a majority of independent directors. A director does not qualify as “independent” if he or she has a “material relationship with the company.” NYSE Rule 303A.02(a). I