ExecutiveLoyalty.org

2016 ALERTS

2016.10.30  Equilar Data Suggests "Meaningful Limit" Risk for Director Compensation.  There is a huge gap growing between the dollar limits that shareholder-approved plans are imposing and . . . continued at  Director Compensation Limits under the entry dated 2016.10.30.

2016.10.22  Monitoring Incentive Compensation: Either Create a Tail, or Chase Yours. Last week, the president of the New York Federal Reserve understandably warned banks to continually assess their incentive compensation structures. He said, “If the incentives are wrong and accountability is weak, we will get bad behavior and cultures.”  Use this link for discussion of why the best answer to providing the “right” incentives likely comes from greater use of performance-based deferred compensation.  

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. ​​

2016.08.26  SERP Claim Allowed under ERISA for Misrepresentation.  A former bank CEO may proceed with claims under ERISA for equitable relief aimed at reforming his release of SERP claims because . . .  see Non-qualified Plan Litigation.

2016.08.18  Tax Withholding under Equity Plans.  A new FAQ C-1 from the New York Stock Exchange clears the way for employers to respond to a FASB rule change by amending their equity award plans in order to allow for tax withholding up to . . . continued at Accounting for Stock Awards.

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 . . . see ERISA 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 of recent 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. . .  see Severance 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 at Banking 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. 

​​2016.06.23  Employees Win M&A-related Stock Option Litigation. A private company's employees have recovered over $16 million through enforcing the change-in-control provisions of the governing stock plan.  Delaware's Supreme Court found that . . . continued at  Stock Award Litigation.​

2016.04.26  Incentive Compensation Rules for Banks (re-proposed).  In contrast to the TARP rules that never influenced broader practices (due to artificial and unsound limits such as limiting incentives to 50% of salary), the newly-proposed banking regulations focus on better practices - such as . . .  continued at Bank-related Incentive Compensation. 

2016.03.28  Investor Litigation over Director Compensation is "On the rise".  That is the warning in this report for purchase from the National Association of Corporate Directors.  Further discussed at Limits on Director Compensation and Director Compensation Litigation.​

2016.02.17  Procedural Stumbles in ERISA Claim Processing do not trigger De Novo Review.  In Messick v. McKesson, the 10th Circuit remanded a disability claim for second-stage review under the plan's claims procedures, even though the initial claim denial letter was misdirected . . . continued with decision for download at ERISA Claims Litigation.

2016.Feb.02   Heads up to Directors: Fiduciary Duties over Executive Hiring and Firing. Rolling forward the logic of the seminal Disney cases that focused on executive compensation, Delaware’s Chancery Court has issued a decision that provides helpful reminders to independent directors: their involvement in executive hiring and firing decisions cannot be “tangential and episodic”; nor should they . . .  continued at Investor Litigation alleging Excessive Compensation.

2016.Feb.10   ISS Updates FAQs for Stock Plan Proposals and Executive Compensation
See 2016 ISS Voting Policies for the latest FAQs that ISS has published, including those applicable to stock plan proposals and executive compensation generally.  New FAQs focus on . . . continued at Proxy Advisors.

2016.Feb.02   Delaware Warnings for Directors: You have Fiduciary Duties over Executive Hiring and Firing
Rolling forward the logic of the seminal Disney cases that focused on executive compensation, Delaware’s Chancery Court has issued a decision that provides helpful reminders to independent directors: their involvement in executive hiring and firing decisions cannot be “tangential and episodic”; nor should they  “mindlessly swallow information” or give deference to the judgments of corporate officers. The court warns that . . . continued at Excessive Compensation Claims.

2016.Feb.   Carried Interest Taxation in Treasury Spotlight
For FY2017, the Treasury Department's revenue proposals aim to "tax as ordinary income a partner’s share of income on an “investment services partnership interest” (ISPI) in an investment partnership, regardless of the character of the income at the partnership level. Accordingly, such income would not be eligible for the reduced rates that apply to long-term capital gains. In addition, the proposal would require the partner to pay self-employment taxes on such income."