Sunday, October 07, 2012

Federal Judge Rules that Compensation Committee Promise to Review Executive Pay in Light of Negative Shareholder Vote Does Not Create Duty to Alter It

Applying Delaware law, a federal judge held that the promise of a company board and its compensation committee to review the executive compensation package if the package should receives a negative shareholder advisory vote did not change the non-binding nature of the say-on-pay vote or obligate the board or committee to amend the plan or recoup any part of the compensation under it. In the proxy statement, the board and committee promised to consider stockholder concerns expressed through the vote, noted the court, and evaluate if any action was needed to address the concerns raised by the negative vote. The board and compensation committee kept that promise, said the court. Thus, the court rejected a shareholder’s claim that the compensation committee members breached their fiduciary duty by failing to alter or amend the pay package or recoup any compensation paid under it in the wake of the negative vote. Haberland v. Bulkeley, ED
NC, No. 5:11-CV-463-D.