A California Superior Court recently dismissed a say-on-pay shareholder derivative lawsuit that was based, in part, on statements made by the defendant in its Compensation Discussion and Analysis (CD&A) section of the proxy statement. The basis for the lawsuit against the defendant’s board of directors was the approval of the compensation plan in January 2011, after a shareholder vote rejected that plan. Despite alleged poor performance results in 2010, and statements by the defendant that its pay for performance policy provided that compensation would be decreased for poor performance, the defendant’s board of directors nevertheless increased executives’ compensation for 2011. The court held that the plaintiffs had not overcome the presumption of the business judgment rule. Notwithstanding what appears to be boilerplate language in the CD&A, the court found the statements to be evidence that the defendant exercised valid business judgment. In finding so, the court held that the plaintiffs… Continue Reading
As previously reported, the JOBS Act exempts an “emerging growth company” from certain executive compensation reporting requirements. Recent SEC FAQs provide additional guidance regarding the scaled down reporting requirements. An emerging growth company may amend its registration statement that was initially filed prior to April 5, 2012 to provide the scaled disclosure by either a pre-effective amendment to a pending registration statement or in a post-effective amendment. In addition, an emerging growth company that completed its initial public offering after December 8, 2011 and prior to April 5, 2012 may file its next periodic report using the scaled disclosure provisions. Finally, an emerging growth company may decide to comply with some of the scaled disclosure provisions and some of the regular disclosure requirements if it does not want to comply with all of the scaled disclosure provisions. The SEC’s FAQs can be found here.