Shearman & Sterling on Director Compensation and the Delaware Courts

The Delaware courts have recently rendered a series of decisions, culminating with the Delaware Supreme Court’s December 2017 holding in In re Investors Bancorp, Inc. Stockholder Litigation, No. 169 (Del. 2017) (“Bancorp”), limiting the extent to which the business judgment rule protects directors when determining their own compensation. Although the law is still developing, the Bancorp decision has already led some Top 100 Companies to change their director compensation approval processes.

Impact on Stockholder Ratification

In Bancorp, the Delaware Supreme Court reversed the Delaware Court of Chancery and held that awards granted to directors under a stockholder-approved equity incentive plan … Read more