Delaware Case Raises Question About Structuring Director Compensation — The Harvard Law School Forum on Corporate Governance

Small business need-to-know say-on-pay (compensation).   As you know, when there is a court finding and ruling, that result can have a like or major impact in all other instances across the country.

Excerpt:  A recent opinion of the Delaware Chancery Court, Seinfeld v. Slager, [1] addresses the legal standard applicable to directors’ decisions about their own pay under Delaware law, an important topic as to which there is little prior law. In an opinion by Vice Chancellor Glasscock, the Court held that a derivative claim alleging that directors breached their fiduciary duties by granting themselves excessive compensation survived a motion to dismiss. [2] In so concluding, the Court also found that the directors’ action did not have the protection of the business judgment rule and was instead subject to “entire fairness” review.

The Court’s decision to require “entire fairness” review means that the claim of excessive compensation could proceed to a full evidentiary trial on the merits.

Read full article via Delaware Case Raises Question About Structuring Director Compensation — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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