New Developments as of 2016.09.12
2016.09.12 Roadmap for Avoiding Director Compensation Litigation. Law360 reports today that a Delaware Chancery Judge has approved the settlement of shareholder derivative litigation alleging Citrix paid excessive director compensation. Those who want to defuse the risk of similar litigation would be wise to consider the settlement requirements for survey data covering cash and equity compensation, an independent consultant, enhanced proxy statement disclosure, and shareholder-approved limits on director compensation. Further info at Director Compensation Litigation.
2016.08.25 ESOP Participants Avoid Dismissal of Claims vs Independent Trustee. Privately-held companies face grave ERISA risks when they establish employee stock ownership plans (ESOPs), mainly due to valuation decisions aimed at protecting participants. The 7th Circuit recently wrestled with a case aimed at an independent fiduciary, and refused to dismiss claims by ESOP participants who alleged that . . . seeERISA Litigation.
2016.08.04 Clawback Trigger Strictly Construed under Contract - Executive Loses. Enforcing a forfeiture-for-competition provision, a Pennsylvania district court had to split hairs - through careful contract analysis - in order to differentiate between retirement under a discretionary employer policy, and retirement under an employer plan. The court found that the employer had negotiated for broad discretion, and wrote as follows in response to executive's argument based on the implied covenant of good faith and fair dealing . . . continued with case link under "PA" within Forfeitures-for-Compensation.
2016.07.30 (Minority View) ERISA Policy Tilts Balance Against Enforcing Forum Selection vs Plan Participants. A majority of courts have enforced ERISA plan provisions designating specific forums for litigation, and their inclusion can better position plan sponsors to reduce their litigation costs. See ERISA Forum Selection for an Illinois district court decision that comprehensively reviews the range of cases, the Department of Labor's position, and ERISA policy.
2016.07.22 Tri-fecta of M&A Cases. See the following links for discussion ofrecent court decisions that provide object lessons in issues relating to (1) protecting a buyer against post-closing ERISA claims by an acquired company's employees, (2) the liability of an asset purchaser for the seller's WARN obligations, and (3) enforcement of non-competition agreements assigned to an asset purchaser.
2016.07.09 Severance Insights: From Drafting to ERISA-fying. It really hurts to pay severance, to get a claims release, and then to be sued. Unfortunately, that happened in a recent case, with the reminders for litigation avoidance being two-fold. . . seeSeverance Litigation.
2016.07.08 Proxy Statement Precautions for Director Compensation. Liberty Interactive's proxy statement includes smart disclosures that should reduce its exposure to shareholder derivative litigation by signaling . . . continued at Director Compensation.
2016.06.21 FDIC "Golden Parachute" Rule Enforced. The 8th Circuit refused to order payment of severance to a CEO, based on the FDIC's golden parachute rule and its finding that . . . continued atBanking Industry Executive Compensation.
2016.05.25 Executive Comp - Problematic Practices. See this checklist itemizing executive compensation practices that ISS has singled-out for scrutiny in its Compensation Policy FAQs as updated 3/16/2016.
2016.05.04 Executive Comp Surveys.The 2016 version of this superb annual survey by Meridien covers a wide range of executive compensation topics, with its key findings about long-term incentives and the design of performance awards being summarized here. Meanwhile, see Severance Surveys for excellent data from a recent Frederic W. Cook report, and Private Company Surveys for a comprehensive Feb. 2016 survey of short-term, long-term, and equity incentives.
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