The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Here’s a summary of this Arnold & Porter memo:

Under Delaware’s corporate benefit doctrine, a stockholder who presents a meritorious claim to a board of directors may be entitled to attorneys’ fees if the stockholder’s efforts result in the conferring of a corporate benefit. On June 20, 2014, the Delaware Chancery Court considered in Raul v. Astoria Financial Corporation whether attorneys’ fees are warranted under this doctrine when a stockholder identifies potential deficiencies in executive compensation disclosures required by the SEC pursuant to the Dodd-Frank Act “say on pay“ provisions. The court held that the alleged omissions at issue failed to demonstrate any breach of the Board of Directors’ fiduciary duties under Delaware law and accordingly the Plaintiff did not present a meritorious demand to the Board. This decision makes clear that the courts will not shift fees to a stockholder (and the stockholder’s law firm) who “has simply done the company a good turn by bringing to the attention of the board an action that it ultimately decides to take.”