Court Holds Compensation Committee Had No Duty to Alter Compensation After Failed Say-On-Pay Vote

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In 2011, 52% of Dex One Corporation’s shareholders voted against Dex One’s 2010 executive compensation as disclosed in its proxy statement.  Plaintiff Brad Haberland subsequently commenced a derivative action claiming, among other things, that Dex One’s directors breached their fiduciary duties when the directors failed to alter or amend the compensation plan after the failed say-on-pay advisory vote.

The United States District Court, E.D. North Carolina, Western Division dismissed the claim.  In so doing, the court referred to the plain language of the Dodd-Frank Act which states “The shareholder vote referred to in subsection[] (a),” however, “shall not be binding on the [corporation] or the board of directors of [the corporation], and may not be construed. . . as overruling a decision by such [corporation] or board of directors [,]. . . to create or imply any change to the fiduciary duties of such [corporation] or board of directors[,] . . . [or] to create or imply any additional fiduciary duties for such [corporation] or board of directors. . . .”

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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