On December 13, 2017, the Delaware Supreme Court in In re Investors Bancorp, Inc. Stockholder Litigation issued a decision having significant ramifications on director compensation. The case increases the risk of plaintiff stockholder claims against directors based on a breach of fiduciary duties where directors grant themselves equity awards pursuant to a plan providing the directors with general discretion to determine the amount, terms, and conditions of the awards – even if the plan includes a stockholder-approved limit in the plan on the size of the awards that may be granted to directors.
Just last week we were presenting at the annual NASPP conference on the increasing scrutiny of director compensation from shareholders, investors, plaintiffs, the SEC, and proxy advisors. This week it seems that the trend is set to continue, as Institutional Shareholder Services (“ISS”) launches its 2018 Benchmark Policy Consultation, seeking public comment on proposed new voting policies for 2018, including a new draft U.S. voting policy on director elections and non-employee director pay. The proposed new…
A recent Delaware Court of Chancery decision builds on prior case law and provides useful insight for companies seeking to establish an effective director compensation limit in order to avoid expensive stockholder litigation. In the case, In Re Investors Bancorp, Inc. Stockholder Litigation (2017 BL 111738, Del. Ch., No. 12327-VCS, 4/5/17), plaintiff stockholders claimed that directors breached their fiduciary duties by awarding themselves “grossly excessive compensation” under a plan that, though approved by stockholders, included…