Dialogue

The latest reporting, opinion and research on executive compensation. We don’t necessarily agree with it all, but we provide it here for consideration.

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May 11, 2015

Quick Picks

Delaware Courts Approve Another Lawsuit Over Director Stock Awards | Winston & Strawn LLP | May 15, 2015

On April 30th, the Delaware Chancery Court allowed the Plaintiffs of Calma v. Templeton, et al. to proceed with their claim challenging the “excessive” award of Restricted Stock Units (“RSUs”) to eight non-employee directors. The Court ruled that the directors’ decision to make the awards was not entitled to routine protection of the business judgement rule. Michael Melbinger of Winston & Strawn LLP explains that the award was deemed excessive on the basis that the company capped director awards to 1 million shares with a current stock price of $55, thereby creating a maximum value of $55 million. However, Melbringer contends, no director at the company has received such an award. The author concludes that the case will have real costs on the directors’ time with no benefit to shareholders, yet will likely yield a settlement that could have been avoided with diligent review from the company’s counsel. Read more

Shareholders’ Votes Have Done Little to Curb Lavish Executive Pay | The New York Times (subscription required) | May 16, 2015

CEO pay has risen an average of 12 percent annually in the five years since the Dodd-Frank law instituted mandatory shareholder Say on Pay votes, according to Gretchen Morgenson of the New York Times. Although lawmakers have said the purpose of Say on Pay was to give shareholders a voice in executive compensation, few shareholders have expressed dissatisfaction with compensation. The 500 largest companies received a median approval of 95% on their Say on Pay votes last year, based on data from Equilar and an analysis by the Shareholder Forum. Morgenson posits that only shareholders at the most generously compensating companies have made significant noise about executive pay because the vote is non-binding and the stock market has continued to rise. Read more

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