Columbia Law School
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executive compensation
Shearman & Sterling explains Compliance with the Formal Approval Requirements of Delaware Law Required for Stockholder Ratification of Director Compensation
On October 28th, the Delaware Chancery Court, in Espinoza v. Zuckerberg, et al. (“Espinoza”)[1], held that stockholder ratification of a transaction that was approved by an interested board of directors must be accomplished formally through a vote …
The Way We Pay Now
The last decade has seen a dramatic shift away from stock options and in favor of performance-based equity or “performance shares” in senior executive packages at large US public companies. Once accounting for over 60% of ex ante executive pay …
Luck and CEO Turnover: Is There Evidence of a Corporate Governance Failure?
Recent provocative evidence suggests that a board’s decision to remove a CEO from office is influenced by components of firm performance that have little to do with the CEO’s efforts or abilities. In particular, several authors have suggested that boards …
Goldstein and Associates discuss Short-Termism, Performance Goals and Executive Compensation
As the struggle for corporate control between advocates for long-term, sustainable economic growth and promoters of short-term financial performance rages on, we thought it made sense to highlight the point at which this battle manifests itself most frequently in discussions …
Gibson Dunn discusses SEC Adoption of Final CEO Pay Ratio Disclosure Rules
On August 5, 2015, the SEC voted, 3-2, to adopt final rules to implement the pay ratio disclosure provision of Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Consistent with their positions on …
Returns on Hiring Public Officials
If you think nothing is impossible, try slamming the revolving door of Washington. Despite widespread frustrations, it continues to shuffle employees between government and corporate jobs, and it’s not expected to stop spinning any time soon.
Many on the street …
Simpson Thacher discusses Delaware Chancery Court Ruling that Self-Interested Director Compensation Decisions May, Under Certain Circumstances, Be Subject to Entire Fairness Review
A recent Delaware Chancery Court decision confirms that, as the court held three years ago in Seinfeld v. Slager, there is no shareholder ratification defense for self-awarded director compensation granted under a stockholder-approved option or bonus plan that lacks …
Wachtell Lipton discusses SEC’s Proposed Compensation Clawback Rules
The SEC proposed its long-awaited compensation clawback rules under the Dodd-Frank Act. The proposed rules would require public companies to adopt and enforce compensation recovery policies that recoup from executive officers incentive compensation resulting from specified accounting restatements. Failure to …
A Reputational Theory of Corporate Law
How does corporate law matter? My recent paper suggests that the main impact of corporate law is not in imposing sanctions, but rather in producing information. The process of litigation or regulatory investigations produces information on the behavior of defendant …
CEO Side-Payments in M&A Deals
In addition to change-of-control benefits (“golden parachutes”), executives often negotiate for personal side-payment at the same time that they are bargaining with an acquirer over the sale of their firm. Side-payments differ from golden parachutes in that they are negotiated …
WilmerHale discusses Final Section 162(m) Regulations Clarify Transition Rules for Newly Public Companies and the Per Participant Limit Requirement
Following the issuance of proposed regulations in June 2011, the Internal Revenue Service issued final regulations on March 30, 2015 clarifying certain exceptions to the compensation deduction limitation imposed by Section 162(m) of the Internal Revenue Code. Section 162(m) imposes …
Orrick discusses In re Polycom and the SEC’s Continued Focus on Internal Controls
Over the past year, the SEC and other regulatory agencies have initiated an increasing number of investigations into companies based on allegations of inadequate internal controls and/or a system for reporting those controls. (For more on internal controls and a …
Goldstein and Associates explain the “Knockout” Option: A New Form of Stock Option
The popularity of stock options as a compensatory tool has been waning at public companies for years. While there have been a number of factors that have contributed to their decline over the past decade or so, three chief concerns …
The Ideal Proxy Statement
We recently published a study (“2015 Investor Survey: Deconstructing Proxy Statements”) in collaboration with RR Donnelley and Equilar that examines how institutional investors use the information in corporate proxies to make voting and investment decisions. Full results are available here…
Simpson Thatcher discusses SEC Filing Sarbanes-Oxley Clawback Action Against Two Former CFOs
On February 10, 2015, the Securities and Exchange Commission (“SEC”) filed settled administrative cease-and-desist proceedings against two former chief financial officers (“CFOs”) of Saba Software, Inc. for their failure to reimburse the company for the stock-sale profits and bonuses they …
Managers’ Career Concerns and Asymmetric Disclosure of Bad versus Good News
Managers are concerned about how their current performance would influence their current employer’s and the labor market’s assessment of their ability. An unfavorable assessment of their ability can have significant adverse effects, including termination and poor job prospects thereafter. Thus, …
Making Sense of One Dollar CEO Salaries
In recent years, top executives taking a $1 base salary (or less) has become a high-profile phenomenon across many types of organizations. The Chief Executive Officers (CEOs) of some of the most recognizable corporations, both successful and distressed, have had …
Arthur J. Gallagher & Co. discusses Incentive Trends in Executive Compensation
With Say on Pay (“SOP”) now entrenched in the psyche of compensation committees along with Institutional Shareholder Services’ (“ISS”) evolving standards, improving disclosure of short- and long-term incentive (“STIP” and “LTIP”, respectively) plans, including measures used, the values associated with …
Pepper Hamilton on Round Two of Shareholder Say-on-Pay Litigation
The third proxy season of the Dodd-Frank Act’s mandatory shareholder “say-on-pay” advisory votes is well underway, and “round two” of shareholder say-on-pay litigation is in full swing. Unlike the first round of say-on-pay lawsuits, which were based on negative advisory …