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A Corporate Governance Lesson From Pericles

Before shareholders may take action at a meeting, a quorum must be established.  See When The Best Offensive Strategy May Simply Be To Stay Home.  The existence of a quorum does not guaranty that action has been validly taken at a shareholders’ meeting because the meeting must also have been properly noticed.  Cal. Corp. Code § 601(a). However, a quorum and proper notice may not be enough.  If the shareholders’ meeting was a special meeting, then it must have been properly called.  Pursuant to Corporations Code Section 600(d), special meetings may be called by the board, the chairperson of the board, the president, the holders of shares entitled to cast not less than 10 percent of the votes at the meeting, or any additional persons as may be provided in the articles or bylaws.

The great Athenian statesman, Pericles, knew the importance of being able to control the call of a meeting.  In the fifth century B.C.E., war erupted between the democratic city-state of Athens and the diarchy of Sparta.  The Athenian leader Pericles convinced Athens to adopt a “rope-a-dope” strategy in which the Spartans were allowed to pillage Attica (the region around Athens) without facing any serious opposition from the Athenian army.  It is a testament to Pericles’ leadership that he was able to convince the Athenians to stay within the city walls and watch the pillaging of their fields and orchards.  Pericles, however, didn’t just rely on his powers of persuasion – he knew the power of the call:

Περικλῆς δὲ ὁρῶν μὲν αὐτοὺς πρὸς τὸ παρὸν χαλεπαίνοντας καὶ οὐ τὰ ἄριστα φρονοῦντας, πιστεύων δὲ ὀρθῶς γιγνώσκειν περὶ τοῦ μὴ ἐπεξιέναι, ἐκκλησίαν τε οὐκ ἐποίει αὐτῶν οὐδὲ ξύλλογον οὐδένα, τοῦ μὴ ὀργῇ τι μᾶλλον ἢ γνώμῃ ξυνελθόντας ἐξαμαρτεῖν . . . .  (Pericles, seeing the [Athenians] being grievously wounded by their present affairs and not thinking their best, thought it right to not go out against the enemy nor to call an assembly or single meeting lest being brought together, the Athenians err by their impulse and not their best thinking).

Thucydides, History of the Peloponnesian War, Book 2, chapter 22. See also Plutarch, Pericles, Chapter 33, section 5 (“τὸν δὲ δῆμον εἰς ἐκκλησίαν οὐ συνῆγε δεδιὼς βιασθῆναι παρὰ γνώμην” (he [Pericles] did not call together an assembly fearing that he would be constrained in his judgment)).

Thus, Pericles’ lesson is that in some circumstances, the power to call (or refrain from calling) a meeting can be critical.   Had Pericles called an assembly, it is entirely possible that the Athenians would have voted to march out against the Spartan heavy infantry and been defeated.  Undoubtedly, the history of western civilization and literature would have been far different, such is the power of the call.

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