Director Compensation Revisited in Light of Investors Bancorp Decision
The Delaware Supreme Court’s recent decision in
In re Investors Bancorp, Inc. Stockholder Litigation raises new questions regarding the appropriate standard of review in cases challenging director compensation levels. As we have
previously noted in our Client Alert dated May 27, 2015, several Delaware Court of Chancery cases in recent years have suggested that the inclusion in a shareholder-approved equity incentive plan of “meaningful limits” on director compensation may help shield directors under the more deferential “business judgment” standard of review, rather than the “entire fairness” standard, in the event of plaintiffs’ challenges to director compensation levels. The new
Investors Bancorp decision suggests that “meaningful limits” under a shareholder-approved plan may not suffice for purposes of securing the “business judgment” standard. The multi-firm memo discusses this new case and possible approaches for companies to consider in light of the case.