Courts may offer "say on pay" relief


The new "say on pay" proxy rule, as one might guess, has led to litigation, not really an explosion of litigation, but enough for companies to be concerned.

The reality is that the Dodd-Frank required proxy vote rule has the potential to cause all sorts of damage to a company's brand and to become a huge distraction to the board.

The latest development as this trend offers some good news for boards: Symantec has won the dismissal of a suit that charged that the board did not disclose enough information about compensation practices ahead of the annual meeting. As noted by Thomson Reuters, the vote marked "the first ruling of its kind in a flurry of similar class actions."

About two dozen similar suits have been filed in the run-up to "say on pay" votes at this year's annual meetings. The "ruling is not binding on judges in other states, but it could have an outsize impact on other say-on-pay cases."

So far the outcomes of these suits has been somewhat mixed. "Settlements have included further disclosures about the companies' compensation practices, no cash for investors and attorney's fees that in one instance reached $625,000."

While boards may quietly cheer this latest development, it's fair to say that the litigation threats are still palpable. Companies would be wise to lay the groundwork assiduously for their "say on pay" votes at upcoming annual meetings.

At a minimum, ahead of the meeting, they need to woo the main proxy advisory firms and they need to take their case directly to shareholders if possible. Lining up support in advance of the meeting--and letting it be known--is a proven prescription for success these days.

Why leave the vote to chance?

For more:
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Related articles:
"Say on pay" legal recourse stokes controversy
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