October 26, 2005

The Legal Status of Majority Vote Governance Guidelines

Here is some food for thought: what legal status is afforded the corporate governance guidelines that NYSE-listed companies are now required to have (and many Nasdaq companies have adopted voluntarily)? I don’t believe there is any Delaware caselaw in this area yet.

In this podcast, Mike Hanrahan, a Partner of Prickett Jones & Elliott, brings his perspective as a litigator to bear on the legal status of voluntary corporate governance guidelines and other matters, including:

– As a litigator, what issues do you see if companies adopt voluntary corporate goverance guidelines regarding directors tendering their resignations if they receive more “withheld” votes than “for” votes?

– How does the recent News Corp flap over its poison pill further reflect issues raised by board policies?

– Do you think more lawsuits will be filed over excessive executive pay issues? Is this a growing trend?

New Proposed Settlement in Fairchild Executive Compensation Lawsuit

Yesterday’s Washington Post carried this article about the new settlement proposed by the parties over the excessive compensation received by Fairchild executives. As noted on (along with the original complaint), Vice Chancellor Strine rejected the first settlement and told the parties to “get something real,” according to the Post article. VC Strine will consider the new proposed settlement in a hearing on November 23rd.

Below are some bullets from the proposed settlement, as filed by Fairchild in a 8-K:

– executives would have to pay business expenses out of pocket and then seek reimbursement

– an oversight committee of outside directors would review executive expenses

– the CEO would have to pay $833,333 personally to defray legal expenses

– the company would save $933,000 in contributions to the CEO’s retirement plan this year and discontinue two life insurance policies for the CEO, saving $150,000 in annual premiums

– the company would have to negotiate a new employment agreement with the CEO