Executive Compensation

On January 30, 2024, the Delaware Court of Chancery struck down Tesla CEO Elon Musk’s $55 billion performance-based stock option package, ruling that Tesla’s directors did not satisfy the stringent “entire fairness” standard in approving his compensation. This case comes on the heels of a $735 million settlement in which Tesla directors disgorged previously-received compensation following shareholder claims of unjust enrichment and breach of fiduciary duty.[1] The court applied the entire fairness standard because of Musk’s enormous control over the transaction, referring to him as a “Superstar CEO”[2] who wielded maximum possible influence over the board. While the compensation package was approved by a majority of disinterested shareholders, the court concluded proxy disclosure was deficient and therefore shareholders were not fully informed.[3] Ultimately, the Tesla board was not able to prove the benefit received from Musk’s leadership was worth the $55 billion Tesla paid for it.Continue Reading It’s Not DE, It’s You: 55 Billion Reasons Tesla is Not ‘Your Company’

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2024”.

Executive compensation issues may not have been the predominant focus for boards of directors in 2023 given the enhanced attention to antitrust, diversity and climate reporting matters, among others. However, there have been several notable developments in executive compensation that boards should be mindful of in 2024. We discuss these developments below.Continue Reading A New Season for Executive Compensation Disclosure

As 2024 gets off to a busy start, companies, boards and management teams are facing a host of new and developing business issues and a large array of regulatory developments, from new and growing risks and opportunities from the adoption of artificial intelligence, to ever-changing ESG issues and backlash, as well as enhanced focus on government enforcement and review. As has become a tradition, we have asked our colleagues from around our firm to boil down those issues in their fields that boards of directors and senior management of public companies will be facing in the coming year, yielding focused updates in eighteen topics that will surely feature at the top of board agendas throughout the year.Continue Reading Selected Issues for Boards of Directors in 2024

Earlier this week, the New York State legislature passed a bill banning all non-competes entered into on or after 30 days past the bill’s enactment, including those entered into by employees or in connection with the sale of a business.  If the bill becomes law, it would make New York the fifth state in the U.S. to enact a ban on non-competes.  California, Minnesota, North Dakota, and Oklahoma have also enacted bans on non-competes, but theirs do not go as far as New York’s full ban, instead banning only employee non-competes, but preserving those that are entered into in connection with the sale of a business.Continue Reading New York Advances Towards Banning All Non-Competes

Minnesota bans new employee non-competes beginning July 1, 2023, and the United Kingdom intends to cap their duration at 3 months

Minnesota Becomes the 4th U.S. State to Ban Employee Non-Competes

Following in the footsteps of California, North Dakota and Oklahoma, Minnesota has banned all employee non-competes beginning July 1, 2023, and bars employers from utilizing choice-of-law or choice-of-venue clauses in an attempt to use a more favorable state’s law as a workaround.  Importantly, the new law is not retroactive and does not affect other employee restrictions, such as confidentiality and non-solicitation covenants. Continue Reading Updates on Non-Competes

[Note: This post has been updated to reflect the SEC’s approval of the Nasdaq and NYSE amendments.]

On Friday, June 9, 2023, the U.S. Securities and Exchange Commission (“SEC”) approved, on an accelerated basis, each of the Nasdaq Stock Market’s (“Nasdaq”) and the New York Stock Exchange’s (“NYSE”) proposed listing standards, as modified by the Exchanges’ respective amendments from last week, implementing the requirement for issuers to adopt and disclose “no fault” clawback policies providing for the recovery of erroneously awarded compensation.[1]Continue Reading Nasdaq and NYSE Propose October 2, 2023 as Effective Date in Amendments to its Proposed Clawback Listing Standards

NLRB GC’s Action Potentially More Far-Reaching than Federal Trade Commission’s Proposed Rule Banning Non-Competes Altogether

On May 30, 2023, the General Counsel to the National Labor Relations Board (the “NLRB”), Jennifer A. Abruzzo, issued a memorandum stating that most non-compete agreements violate the National Labor Relations Act (the “Act”).  In doing so, General Counsel Abruzzo directed the NLRB’s regional offices to investigate employers using non-competes to determine whether their usage is “overbroad” or not.  General Counsel Abruzzo also directed the regional offices to seek make-whole relief for employees who lost employment opportunities because of a non-compete agreement, even where the employer did not enforce the agreement and, if necessary, present evidence of such lost opportunities at trial.Continue Reading NLRB General Counsel Unleashes Regional Offices to Clamp Down on “Overbroad” Non-Competes

Earlier this month, the Treasury Department published its explanation of President Biden’s proposed fiscal 2024 budget. We have summarized the tax rate increases, as well as the executive compensation and employee benefits proposals below. These proposals, which are similar to the ones contained in President Biden’s last few budgets, are unlikely to be passed in their current form, especially now given that the House of Representatives is controlled by the GOP. However, we expect that there will be lots of negotiating over the fiscal 2024 budget, so one or more of these proposals may find their way into the final budget. We will publish updates as these proposals evolve.Continue Reading President Biden’s Fiscal 2024 Proposed Budget Includes Tax Rate Increases, and Several Executive Compensation and Employee Benefits Changes

We have once again asked our colleagues from around our firm to boil down the issues in their fields that boards of directors and senior management of public companies will be facing in the coming year. In the following pages, we present the results for 2023 – focused updates on 18 topics that will surely feature at the top of board agendas throughout the year.Continue Reading Selected Issues for Boards of Directors in 2023

On October 26, 2022, the Securities and Exchange Commission adopted final rules implementing the Dodd-Frank requirement for issuers to recover incentive-based compensation erroneously paid to current and former executive officers due to an accounting restatement.

These rules were originally proposed in July of 2015, and subsequently reopened for comment in October 2021 and June 2022.3