Excessive Director Pay Settlement Resulting in Corporate Governance Reforms

Settlements involving lawsuits over excessive compensation to non-employee directors are requiring companies to change their compensation practices. Director compensation is under increased scrutiny by shareholders. The catalyst for these concerns stems from the notion that boards of directors improperly are setting their own pay. The Delaware Court of Chancery approved settlement agreements in two prominent shareholder derivative actions alleging excessive director compensation: Calma v. Templeton, Del. Ch., No. 9579-CB, order and final judgment 9/9/16; and Espinoza v. Zuckerberg, Del. Ch., No. 9745-CB, order and final judgment 3/30/16. The terms of both settlements require companies to implement specific changes to their director compensation practices.