New in Stanford Closer Look series: Shareholder Lawsuits: Where Is the Line Between Legitimate and Frivolous?Tuesday, November 27th, 2012
Authors: Professor David F. Larcker, Stanford Graduate School of Business, and Brian Tayan, Researcher, Center for Leadership Development and Research, Stanford GSB.
Published: November 27, 2012
Shareholders of public companies are not responsible for designing executive compensation packages. Still, a shareholder vote on compensation is required in two circumstances: when a company wants to establish an equity-based compensation plan, and annually as part of the Dodd Frank requirement shareholders have an advisory “say on pay.” In deciding how to vote, shareholders rely on information provided in the annual proxy.
Recently, shareholder groups have sued companies for inadequate disclosure. They allege that the companies provide insufficient disclosure to determine how they should vote on these matters.
We explore this issue in closer detail and ask:
- How much disclosure is too much disclosure?
- If a company follows SEC guidelines, why is this not sufficient?
- When do lawsuits cross the line from legitimate to frivolous?
- If disclosure litigation is successful, what other board decisions would be subject to potential lawsuits?
Read the Closer Look and let us know what you think!