There were a number of issues in the case.  The most critical from a governance perspective was the board's obligation with respect to the approval of the poison puts.  What is clear from the pleadings and the oral argument, is that the board was unaware of the poison put.

• JUSTICE: Am I correct that the officers and directors were given assurances by their legal advisors that there was nothing, there were no unusual provisions buried in this document?

• MR. FRIEDLANDER: The only -- that's correct.  There was evidence that an inquiry was made: Is there anything unusual or not customary in the agreement?

The only real question, then, was whether the board should have known about the provision and approved it consistent with its fiduciary obligations.  Counsel for Plaintiff asserted that it was an anti-takover device and that boards routinely ought to know about these matters.  

• This -- a proxy put was invented in 1986 as an anti-takeover device. The first generation of proxy puts and poison debt, 1986 to 1988, are generally recognized in the literature as to defend against proxy contests and hostile takeovers. This Court's jurisprudence is based on allocating responsibility to the board to make an informed judgment about whether a given defensive measure satisfies Unocal or satisfies Blasius if it reaches that above . . .

Somehow, however, the importance of the provision got lost on the Court.  The next question back made this clear.

• JUSTICE: Okay, but what I'm trying to get to is the argument you're making, in essence, is that directors must read every page of every document that they have to pass upon.

In other words, the Court converted a discussion over whether the board should know about an anti-takover device in a loan document into whether a board had to review every page of every document.  It was not an argument that plaintiffs were suggesting and not an argument that anyone has likely ever made to the Delaware Supreme Court.  Yet it is how at least one Justice potentially heard things.  

Indeed, reframing the question in these terms is misguided.  Even if directors read every page of every agreement, they would not understand them.  The issue is whether directors understand the contents of the material presented to the board.  This is usually done by having experts attend, make presentations and answer questions.  Actually reading the documents is probably the least efficient way to be "informed," particularly for non-lawyers.

So this wasn't what this case was about.  It is whether the decision makers (the directors) have an obligation to be informed about certain types of provisions in agreements.  Presumably when the presentation was made about the debt agreement, the directors were told the amount of the loan and the interest rate, as well as other terms.  It would not have been unreasonable to expect them to be informed about anti-takeover provisions as well. 

The question nonetheless provided insight into the Court's perspective.  They likely saw this case as the potential beginning of the obligation to read every page of every agreement.  If directors needed to know about anti-takeover devices, what would be next?  Before it was over, they would need to know about choice of law provisions and severability clauses.  The Court was determined not to go down this path.

In fact, it was a false path.  To adopt reasonable standards about what directors need to know when they approve important agreements would provide some certainty, protect shareholders and, frankly, help directors ask the questions that require answers.  The standards would never extend to every provision of every agreement.  It would also incidentally put the directors on alert about provisions that in fact they might want excluded.

But that is not what the Court did in this case.  Better to not be told at all than to walk down the path of having to read every page of every agreement. 

Primary materials can be found at the DU Corporate Governance web site.  The oral argument in this case is posted at the Delaware Supreme Court's web site.