Executive Compensation News and Views 2Q 2015 | Newsletter

Executive Compensation News and Views – 2Q 2015

Real Estate & Infrastructure

June 25, 2015

Director Compensation Lawsuits

Over the past few years, there has been a small wave of shareholder lawsuits asserting that director compensation reflects excessive pay. Such claims are generally predicated on the assertion that director stock grants (and to a lesser extent cash compensation) are a breach of fiduciary duty, waste of corporate assets and unjust enrichment.

Recent Director Pay Lawsuits
Recent lawsuits relating to director compensation include the following:

  • Republic Services, Inc. – One of the first lawsuits relating to director compensation was in 2012, with shareholders of Republic Services claiming that the directors had breached their fiduciary duty in granting Director equity awards. The company’s motion to dismiss was denied and the lawsuit was settled in 2014 with the board agreeing to adopt limits on the number of shares that could be awarded to individual directors in any calendar year. The Company also eliminated the $250,000 one-time award to newly-elected directors.
  • Facebook – In June 2014, a derivative action was filed against executive officers and directors of Facebook alleging that the company’s equity plan allows directors full discretion to set their compensation and that the board has awarded excessive compensation to directors. Under Facebook’s Equity Incentive Plan, the company may grant no more than 2.5 million shares each year to any plan participant (or approximately $200,000,000 per annum). The complaint also alleges that the average of $461,000 paid per non-employee director was excessive relative to peers noting that it was 43% higher than other peer companies.

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