Board Compensation

04/20/16
By: Paul Dorf, CRI

A recent article[1] provided information on three recent Delaware Chancellor Court decisions on Board Compensation.  While these decisions focused on publicly-traded companies that are registered in Delaware, these decisions may be much further reaching, and should be taken under advisement by all public companies.   Since these decisions often act as precedents for other types of organizations, Not-for-Profits and some privately-owned companies may want to consider the Court’s recommendations.

The Court indicated that: (1) the Board’s action on compensation for the Board members must be reviewed under the “fairness standard” rather the “business judgement rule”, (2) they must amend the Board’s charter accordingly, (3) they must engage an independent compensation consultant to conduct an annual review of their total compensation, and (4) they must submit the Board’s annual compensation recommendation to the shareholders for approval.

[1] Recent Settlement Proposal Puts Process for Setting Outside Director Compensation in the Spotlight, Veritas, April 4, 2016

 

For a pdf of the press  release, click here.