The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Recently, I blogged about the spate of Section 162(m)-based lawsuits that increasingly are in vogue. The latest one of those was filed against Allergan in Delaware last week (here’s the complaint).

Now we have a new breed of lawsuit – or perhaps it’s more accurate to call it a retread of a vein of old-fashioned pay suits – because it’s not a say-on-pay or Section 162(m) lawsuit, but rather a breach of fiduciary duty – with a helping of alleged self-dealing – suit filed against Ralph Lauren last week in the New York Supreme Court. Even though there was a negative ISS recommendation, the company’s say-on-pay received 96% support (84% when backing out management’s ownership) Founder Ralph Lauren has voting control of the company though Class B shares and it’s deemed a “controlled company” under NYSE rules. The complaint is posted in our “Comp Litigation” Portal. Steven Kittrell notes these allegations in his “Just Compensation” Blog:

– Ralph Lauren Company made a large donation to a charity “affiliated” with a member of the compensation committee;

– One compensation committee member is a “Class B” director. Class B directors are elected solely by Class B stock that is owned only by Ralph Lauren and his family;

– The compensation committee did not hire a compensation consultant in the last year, but got recommendations from management’s compensation consultant for review.

Steven concludes that this case is unlikely to go to trial – and while that is always the best assumption because these cases rarely do, the complaint has a load of allegations that don’t pass the “stink” test giving this case somewhat of a “Disney-esque” quality to it…