Settlement of Solak v. Barrett May Provide Additional Guidance on Setting Director Pay

I’ve stressed how important it is for public company executives and directors to stay apprised of developments in the director pay area, including developments/settlements of director pay lawsuits.  Earlier this summer, the Delaware Chancery court approved a settlement of Solak v. Barrett, a case in which the plaintiffs alleged that the directors of Clovis Oncology breached their fiduciary duties by adopting a compensation plan that overcompensated themselves, in relation to companies of comparable market capitalization and size. In their complaint, the plaintiffs cited as evidence, the fact that the non-employee directors of Clovis each had been paid an average of $429,163 annually between 2012 and 2016, while Fortune 50 companies pay their directors a median total of $281,667 a year and S&P 500 companies pay an average $277,237 a year.  Read More ›

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Yet Another Reason to Focus on Director Pay

We have previously encouraged our readers to focus on the size of their director pay packages and the processes their boards undertake in setting director compensation.  Prior focus on these issues was recommended largely as a way to mitigate the risk of litigation for excessive pay.  In their current U.S. Compensation Policies FAQ, Institutional Shareholder Services Inc. (“ISS”) has given boards yet another reason to focus on director compensation. In the FAQ, ISS indicates the following:

  • In evaluating non-employee director pay, ISS will look for “reasonable practices” that “adequately align the interests of directors to those of shareholders.”
  • A director pay program should incorporate “meaningful” stock ownership and/or holding requirements.
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Settlement of Calma v. Templeton Provides Guidance on Setting Director Pay

In response to recent lawsuits by the plaintiffs’ bar, I have previously posted about why public company employers may wish to consider adding a separate annual limit on non-employee director equity awards. Just last month the Delaware Chancery Court approved a settlement of Calma v. Templeton, a case in which Calma challenged the size of director equity awards granted under Citrix’s shareholder-approved equity compensation plan.  Among other things, the settlement provides what some practitioners believe to be a reasonable framework for structuring director compensation programs on a go-forward basis.  Key provisions of the settlement are as follows:

  • Citrix agreed to amend its equity compensation plan to incorporate a $795,000 cap on the value of equity awards that may be granted to any one non-employee director in any one year. 
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