Executive Compensation

In recent years, shareholder plaintiffs have brought a series of claims before the Delaware Court of Chancery alleging that directors of Delaware companies have abused their discretion in granting themselves excessive equity compensation for their board service.  These cases raised the threshold question of whether the plaintiffs’ challenges should be reviewed under the “entire fairness” standard, which requires the company to bear the burden of proving that the director awards were fair, or the more deferential “business judgment” standard, which grants considerable discretion to directors’ decisions, often resulting in dismissal of claims that fail to plead particularized facts indicating fiduciary lapses by the directors. Continue Reading New Year’s Resolutions For Director Compensation From <i>Investors Bancorp</i>

Following the enactment of the Tax Cuts and Jobs Act (the “TCJA”) in late December 2017, which introduced significant reforms to the U.S. tax system, the Internal Revenue Service (“IRS”) issued new withholding guidance in January 2018.[1]  Recently, two Democratic legislators have openly questioned whether the IRS’ 2018 withholding tables may result in systematic under-withholding of W-2 earnings.  Companies will need to comply with the IRS withholding guidance, through administrative procedures that are typically the responsibility of payroll departments and outside payroll service providers.  Companies may also be concerned about the consequences of under-withholding from an employee-relations perspective. Continue Reading Withholding Judgment

2017 began with a heightened level of uncertainty as the beginning of the year brought significant change in the legal environment, including a change in administration that promised to significantly alter the tenor of regulation. While certain changes did occur in 2017, in many respects, 2018 is setting itself up as the year to watch for continuing developments in areas that are likely to fundamentally transform how companies operate and interact with an increasingly larger number of vocal stakeholders. The trends discussed in each of the sections of this memorandum will increasingly be a focus of boards of directors and companies in the United States and across the globe, particularly as boards consider how best to assess and assist in mitigating associated risks. The role that the board and its oversight plays in guiding companies in these times will be critical and a strong understanding of the issues and challenges facing boards and companies over the next year and beyond will assist boards in addressing the issues and complexities that will undoubtedly arise in 2018.

We invite you to review these topics by clicking on the links below.

For a PDF of the full memorandum, please click here.

Selected Issues for Boards of Directors 2018 (Home Page)

Developments in Best Practices in the Boardroom

Significant Regulation and Reform Under the Trump Administration

Activism in 2018

Cybersecurity and Data Privacy Updates

The New DOJ FCPA Corporate Enforcement Policy Highlights the Continued Importance of Anti-Corruption Compliance

Evolution or Revolution for Companies with Multi-Class Share Structures

Corporate Governance in the Context of Brexit and Political Uncertainty in the United Kingdom and Europe


On December 5, 2017, the Financial Reporting Council launched a consultation on its proposal to significantly revise the UK Corporate Governance Code.

The amendments seek to encourage continued improvement in the quality of corporate governance in the UK and are centered around the themes of company culture and diversity, employee and other stakeholder representation, responding to significant shareholder opposition, independence of the chairman and other non-executive directors and executive remuneration. In this memorandum, we briefly explore the main proposed reforms.

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The recently proposed Tax Cuts and Jobs Act (the “Act”) includes executive compensation tax reforms that, if enacted, would have significant implications for the way in which companies structure their compensation programs.

The Act was introduced in the U.S. House of Representatives on November 2, 2017, and may undergo significant revisions as part of the legislative process in the House, and the U.S. Senate is expected to propose tax reform legislation shortly that may not be identical to the House’s bill, even though an identical bill could facilitate enactment without the need for a joint committee to reconcile differences.

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The New York City Commission on Human Rights (the “CCHR”) recently released guidance on the New York City salary history law (the “Law”) in the form of frequently asked questions. The guidance clarifies several aspects of the Law, including the application of the Law in the context of corporate acquisitions and the ability of employers to inquire about forfeited deferred compensation and unvested equity.

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On September 21, 2017, the Securities and Exchange Commission (“SEC”) issued helpful guidance to assist companies in complying with the CEO/median employee pay ratio disclosure requirement (the “Rule”) under Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K. The guidance also addresses the issue of SEC enforcement action in respect of pay ratio disclosure.

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Questions for Boards and Management

On April 10, 2017 Wells Fargo released the independent directors’ report on sales practices at its community bank. While the report covers familiar elements of the widely-publicized accounts-creation  problems at the bank, it also takes an inside look at the organization to determine what caused the problems in the first place and what allowed them to persist for years before last fall’s regulatory enforcement actions.  The report cites the following as principal causes: Continue Reading With the Benefit of Hindsight: The Wells Fargo Sales Practices Investigation Report

President Trump has repeatedly used his Twitter account to single out companies for criticism of their business practices, raising the question for a broad range of public companies of how to prepare for and potentially respond to such criticism. Of course, rhetorical attempts by politicians to influence the conduct of private enterprise – commonly referred to as “jawboning” – are an old political tactic. The nature and frequency of jawboning in the current environment makes this a serious issue for boards and management at a wide variety of public companies, in a way that it has not been in the recent past.

Crisis plans maintained by public companies for other circumstances may provide useful guidance for how to respond to a politician’s social media attack (an “SMA”). However, every type of crisis raises unique concerns and considerations. Many companies should carefully consider the appropriate response to an SMA in advance.

This note is intended to aid public companies for a discussion at the board level concerning SMAs. It covers three main areas that public companies should specially consider: (i) governance, (ii) executive compensation- and employment-related issues and (iii) communications, and provides senior legal advisors with an outline of relevant considerations. While the principal considerations relevant to responding to an SMA will not typically be legal concerns, corporate governance considerations constitute threshold legal issues and employment-related and communications considerations implicate important legal issues.

Please click here to read the full memo.