Corporate Governance

Designing Defensible Director and Executive Compensation Packages

Director and executive compensation has increasingly come under fire as being excessive when companies fail to perform well financially or top leaders are believed to have violated their responsibilities. Shareholders are taking companies to court to make their point.
— By Royston Arch

There has been a steady increase in litigation by stakeholders challenging executive compensation. There are the expected lawsuits by stockholders claiming directors and CEOs are overpaid based on corporate financial performance. There have also been a variety of lawsuits claiming directors and/or the CEO set misleading performance targets, acted with disregard for their fiduciary responsibilities, and approved unusually large bonuses or other awards that were not justified, to name a few reasons. In the U.S., the courts are increasingly applying the entire fairness review standard rather than the business judgment, which means more cases concerning board and execut...

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