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Cypress Semiconductor Corp. must allow its former chief executive officer and founder T.J. Rodgers to access internal documents related to possible misconduct by the company’s chairman, the Delaware Chancery Court ruled April 17 ( Rodgers v. Cypress Semiconductor Corp. , 2017 BL 124718, Del. Ch., No. 2017-0070-AGB, 4/17/17 ).
Delaware law allows shareholders to inspect a company’s books and records to probe possible wrongdoing. The ruling clarifies what is a proper purpose for such an inspection.
Rodgers sought the documents to investigate alleged conflicts of interests by Cypress Chairman Ray Bingham, who also is a founding partner of venture capital firm Canyon Bridge Capital Partners Inc. Rodgers alleged that Canyon Bridge and Cypress are competitors for acquisition opportunities in the semiconductor industry.
There is “a credible basis to infer that Bingham may have violated Cypress’ Code of Business Conduct and Ethics,” Chancellor Andre G. Bouchard said.
Bouchard found there was evidence to support Rodgers’ claim, including that Canyon in November 2016 agreed to acquire Portland, Ore.-based Lattice Semiconductor Corp. Rodgers also testified that Cypress had twice tried to acquire Lattice in the last five years. “The dual hats Bingham wears suggest that his interests with respect to Canyon Bridge may well conflict with the business interests of Cypress,” Bouchard said.
Rodgers in April 2016 resigned from his position as CEO at the San Jose-based semiconductor design and manufacturing company. Cypress later that year appointed Bingham as chairman.
Rodgers currently is waging a proxy contest at the company, offering up a slate of two directors. The court rejected the company’s argument that Rodgers’ inspection demand was a tactic to boost his proxy contest.
“In my view, Rodgers’ Demand and the proxy contest appear to be parallel efforts to address the same perceived misconduct, but Cypress has not sustained its burden to prove that Rodgers’ actual purpose for making the Demand was to aid his proxy contest in an improper manner,” Bouchard said.
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