Derivative Lawsuits on Radar of Failed Say-on-Pay Vote Companies

by Gary Larkin

If you sit on the board of any of the 39 companies that had a failed Say on Pay vote the past proxy season, I don't need to tell you that despite the fact the votes were only "advisory" there will be some shareholder repercussions. In the past year, seven companies have already faced one of those repercussions - the dreaded derivative shareholder lawsuit.

It's possible the plaintiff's bar may not limit their targets to companies with failed SOP votes; the word is that any vote below 70 percent is troubling. And in some cases compensation consultants have been named as defendants.

At last check, the companies facing derivative lawsuits from shareholders after negative SOP votes include:

  • Occidental Petroleum (2010)
  • Keycorp (2010)
  • Beazer Homes (2011)
  • Umpqua Holdings Corp. (2011)
  • Jacobs Engineering Group (2011)
  • Hercules Offshore Inc. (2011)
  • Bank of New York Mellon (2011)*

*=It should be noted that BNY Mellon is the only company to be sued following a successful SOP vote.

So just what are shareholders trying to achieve with these lawsuits and what kind of impact will it have on those companies named?

"Shareholders are looking at Say on Pay as one way to have their voices heard," said Russ Miller, managing director of ClearBridge Compensation Group. "They see the lawsuits as a way to achieve change in the executive compensation program."

Read the rest of this article on the Governance Center Blog

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