As we enter the 2013 proxy season, companies should be aware of a new flavor of shareholder litigation. Some of the same firms that routinely attack M&A transactions have set their sights on a new target: attacking “say-on-pay” and other compensation-related disclosures in annual proxy statements. Using the leverage of the threats of enjoining the shareholder vote and the burden of substantial discovery requests, the plaintiffs’ firms are seeking to pressure issuers to provide supplemental proxy disclosures to earn six-figure attorneys’ fees.
The New Types of Proxy Litigation -
Over 20 lawsuits have been filed – mostly by the same law firm, although others are now joining in – alleging that the boards of directors have breached their fiduciary duties by approving proxy statement disclosures that are insufficient to allow shareholders to make an informed decision when voting on the challenged “say-on-pay” or executive compensation plan proposals.
The plaintiffs have sought to enjoin votes on three types of proposals...
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