March 2015

Cause for Concern Regarding Director Compensation

Directors & Boards

For his latest contribution to Directors & Boards, Philadelphia partner Doug Raymond explored the oft-discussed issue of directors approving their own compensation.

“Cause for Concern Regarding Director Compensation” analyzes Calma v. Templeton and its echoes to Seinfeld v. Slager. In both matters, the courts asserted that “directors who set their own compensation without guardrails approved by the shareholders risk facing breach of fiduciary duty claims and the burden of demonstrating that their actions were entirely fair.” Doug outlines proactive measures that boards can take to mitigate these risks and steel themselves against litigation, from engaging a compensation expert and reviewing existing compensation programs and approval processes to developing practices to document compensation decisions exhaustively.

Associate Ryan Costa assisted with this article.

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