Philadelphia partner Doug Raymond authored an article for Directors & Boards titled “Say on Director Pay.” The article explores the impact of the Delaware Supreme Court ruling in In re Investors Bancorp, Inc. on boards of directors setting their own compensation. In this case, a derivative suit was filed against the company’s board for a breach of the directors’ duty of loyalty, alleging that the directors awarded themselves excessive stock-based compensation. The court held that stockholders cannot authorize boards of directors to use their discretion to determine their own compensation under an overarching compensation plan.
Doug wrote that following the court’s decision, boards should consider whether to submit specific director awards or the formula governing these payments to a stockholder vote. He added that this would restrict the board’s ability to increase director compensation from the approved amount.
Philadelphia associate Ashlee Paxton-Turner also assisted with the preparation of this column.