Tuesday, May 29, 2018

Live Nation shareholder sues to block vote on board members due to misleading proxy statement

By Rebecca Kahn, J.D.

After the world’s largest live music producer awarded nearly $11 million in executive bonuses for exceeding 2017 targets, a shareholder sued the company and executives for including false and misleading compensation information in its 2018 proxy materials. Filed in the Eastern District of New York, the complaint seeks injunctive relief, including blocking an upcoming vote on compensation committee members, a corrected proxy statement, and the return of any wrongfully awarded cash and stock bonuses (Stein v. Live Nation Entertainment, Inc., May23, 2018).

Live Nation Entertainment, Inc. claims to be the world’s largest live entertainment company, producing live music concerts, providing an advertising network for corporate brands, as well as a ticket sale and marketing company. Live Nation reported its 2017 Adjusted Operating Income (AOI)as $625,142,000. In April, shareholders were provided with a 2018 proxy statement to solicit the irproxies for management proposals, including voting for compensation committee members, at an annual shareholders' meeting on June 6,2018.

Shareholder Shiva Stein has sued the company and executives under Exchange Act Section 14(a) and SEC rules and regulations. She seeks an injunction to prevent a vote on the company’s compensation committee because of false and misleading statements in the Compensation Discussion & Analysis (CD&A) section of the 2018 proxy statement.

Bonuses. Stein’s complaint alleged that the CD&A contains false and misleading statements concerning cash performance bonuses paid to certain executive officers and restricted stock awards that vested for the same officers. The CD&A represented that the bonuses and restricted stock awards were contingent on achieving at least 90 percent of an AOI of $700 million for the year 2017. The CD&A also falsely stated that the company achieved 104 percent of its AOI performance target, which would be $728 million.

The CD&A refers shareholders to a page in the company’s 2017 annual report for a reconciliation of AOI to operating income. However, the referenced page lists the 2017 AOI as only $625, 142,000—less than 90 percent of $700 million. Therefore, the complaint alleges, none of the name dexecutive officers should have received a cash incentive award or had their restricted stock awards vest for 2017.

The total cash bonuses awarded to the named executive officers based on the false Adjusted Net Income target was $9,600,667 plus total restricted stock awards vested to the executive officers worth $1,254,327.

Three scenarios. The complaint claims that the 2018 proxy statement was false under any of three scenarios: (1) it misreported the target of $700 million where, in fact, a lower target applied; or (2) the Form 10-K was false (and by extension the 2018 proxy statement) because it under reported the AOI of $625 million; or (3) the 2018 proxy statement was false because Live Nation did not achieve its target AOI and the named executive officers were awarded bonuses and restricted stock awards they did not deserve.

The case is No. 1:18-cv-03030.