Boards and committees that grant themselves awards under company
equity plans should review those plans in light of a 2012 Delaware
Chancery Court case.
In Seinfeld v. Slager,1 a shareholder
brought five derivative claims alleging breaches of fiduciary
duties in the awarding of compensation to the board and officers.
The only claim to survive the summary judgment motion of the
defendant directors was a claim that the board had awarded itself
excessive compensation when it granted each of the directors
restricted stock units with a value of $743,000 and $215,000 per
award in 2009 and 2010, respectively. The defendants argued that
the awards did not violate the terms of the stockholder approved
Stock Plan under which the awards were made and, therefore, were
protected by the business judgment rule. However, the judge
rejected the directors' contentions because, although the Stock
Plan set limits on the size of the awards, it did not set forth
"meaningful" limits in the
