Reconceptualizing Stockholder "Disinterestedness": Transformative Institutional Investor Changes and Motivational Misalignments in Voting

The foundational premise of the stockholder franchise is that coupling the economic rights of shares with their voting rights will generally motivate value-enhancing voting. With transactions otherwise subject to judicial review under entire fairness or enhanced scrutiny standards, Delaware courts have long given validating—cleansing—effect only to votes of “disinterested stockholders.” Corresponding issues often arise in merger agreements requiring approval of “unaffiliated” stockholders. While the landmark 2025 Delaware Senate Bill 21 (SB 21) amendments established a statutory definition of “disinterested stockholder,” they did nothing to modernize the construct or establish a procedural architecture for determining disinterestedness.

The doctrine has remained frozen, reflecting assumptions at odds with transformational changes in institutional investor financial stakes and investor-specific policies and practices—changes that have increased the extent and complexity “decoupling” of economic rights of shares from their voting rights. We show that rigid application of the doctrine will miscount or disqualify institutional investor votes that are, in fact, aligned with the foundational premise, and will inadvertently shift power to individual investors and activist funds. We also show that the existing procedural architecture imposes informational burdens effectively impossible to meet in the public company context.

This Article breaks new ground by proposing a reconceptualization of “disinterested stockholder” and offering a procedural architecture for implementing the new statutory definition. This substantive and procedural reconceptualization should help preserve properly-motivated institutional investor voices and make disinterested voting workable. The realization of this reconceptualization would require no legislative action.

Substantively, we offer a comprehensive and systematic conception for stockholder “disinterestedness” and associated terminology, a yardstick more refined than the one we previously offered. In advancing this conception, we contemplate: (1) considering both an investor’s “financial stakes in host company shares” and its “organization voting dynamics” (such as the pole star an investor uses to guide its voting decisions); (2) instead of categorically counting or excluding an investor’s votes depending on its “disinterested stockholder” status, those shares it holds voted consistent (inconsistent) with the foundational premise would be counted (not counted) as “disinterested shares” (“interested shares”); and (3) converting the doctrine to more of a default rule, by recognizing, e.g., an investor’s public adoption of a “host share value maximization” pole star. Procedurally, we propose that disinterestedness be presumed but that the presumption be rebuttable through readily available public information. Full evidentiary review of disinterestedness, including consideration of organizational voting dynamics, would be allowed unless, e.g., an investor’s holdings were too insignificant to affect its vote or to influence the overall voting outcome.

In illustrating the problems with the existing doctrine and the potential of our reconceptualization, we consider, among other things, the highly disparate voting pole stars and hitherto-unexamined voting patterns of State Street Global Advisors (SSGA) and Vanguard.