April 23, 2012
The New Thing? Say-on-Parachute Disclosure Sparks Lawsuit
– Mark Poerio, Paul Hastings and ExecutiveLoyalty.org
With bank M&A heating up, the complaint against Encore Bancshares could be symptomatic of what to expect from the new “say-on-parachute” disclosure requirement. Encore filed its special meeting proxy statement on April 12th, and the complaint soon followed with allegations drawn directly from the say-on-parachute disclosure on page 55.
The complaint basically alleges breaches of fiduciary duties by officers and directors due to the compensation they receive from Encore’s sale. This litigation is a healthy reminder that, although the Dodd-Frank Act’s Say on Parachute disclosure and vote are not expected to derail transactions, they involve sensitive disclosures that warrant up-front diligence and thoughtful presentations to shareholders.