Law Professor Observes Shareholders Taking a Stand against Excessive Executive Pay
On August 15, 2011, The National Law Journal published an opinion piece by Daniel J. Morrissey, a professor and former dean at Gonzaga University School of Law, advocating for shareholder activism in response to excessive compensation of executives. In the article, entitled “Courts Should Curb Executive Pay,” Mr. Morrissey points to income statistics, economic studies and other points of reference to highlight the excessive rewards of some top corporate executives. He notes that courts have historically deferred to “what they call the business judgment of directors and turned away shareholder claims that such exorbitant and unearned recompense constitutes a waste of corporate assets.”
With last year’s Dodd-Frank Wall Street Reform Act, however, which included a “say-on-pay” provision that required public companies to allow their shareholders an advisory vote on the compensation of their top officials and required companies to report the results, Mr. Morrissey sees the tides shifting towards a “new and more realistic judicial understanding” of the fiduciary duty of corporate officers who accept excessive compensation for themselves. He cites a recent decision in In re Citigroup Inc. Shareholder Derivative Litigation, in which the court refused to dismiss a shareholder’s claim that more than $60 million awarded as severance to Citigroup’s CEO Charles Prince during the financial meltdown was a waste of corporate assets. Mr. Morrissey notes that this “judicial willingness to strike down excessive corporate recompense” is going to be tested as several shareholder suits are pending against boards that have declined to rescind lavish compensation packages of top corporate officials when the shareholder vote in “say-on-pay” balloting was negative.
A dedicated advocate for shareholders and a leader in shareholder rights litigation, Robbins Umeda LLP* is on the forefront of shareholder efforts seeking accountability and reform at public companies which have been damaged by excessive compensation of certain company officials, including a case wherein the company’s board approved lavish pay hikes to corporate officers, despite the company’s dismal financial performance during the same time period.
Click here to view Mr. Morrissey’s article in the National Law Journal.
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* The firm name changed from Robbins Umeda LLP to Robbins Arroyo LLP on January 1, 2013.