Proxy Season Update

As the 2013 proxy season comes into full swing, a review of the fundamental principles governing a company's disclosure obligations is warranted, as is a consideration of how complaints are exposing novel theories of potential exposure for public companies. A relatively new weapon in the arsenal of plaintiffs' counsel is an action to enjoin an annual shareholder meeting on the ground that proxy statements issued by a company inadequately disclose information concerning transactions that require shareholder approval, including the issuance of restricted stock options and descriptions of adjustments to executive compensation (called for by the "say-on-pay" vote). ¹ Such actions have the potential to hold hostage the consummation of meetings and proposals that are often critical to the company's strategic goals, and plaintiffs have won several early victories by obtaining injunctions and/or settlements for perceived inadequacies in proxy disclosures.