August 30, 2012
Failed Say-On-Pay Vote Doesn’t Trump Business Judgment Rule
– Broc Romanek, CompensationStandards.com
As Jim Hamilton recently noted in his blog, “a growing consensus among federal courts that, under Delaware law, a negative shareholder say-on-pay vote does not rebut the business judgment rule presumption normally accorded to a company’s board of directors.”
On July 13th, a federal judge in the Northern District of Illinois, ruled as such on the basis of Delaware law (Gordon v. Goodyear, ND Ill., No. 12 C 369, July 13, 2012). In the derivative suit, involving Navigant, the judge noted that the plain language of Dodd-Frank, which requires the shareholder vote on pay, “makes clear that the shareholders vote is non-binding on the corporation and that it does not create or imply any change in the board members’ fiduciary duties.”