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In re Investors Bancorp, Inc. Stockholder Litigation
Delaware Supreme Court
177 A.3d 1208 (2017)
The board of directors of Bancorp, Inc. (defendant) proposed an equity incentive plan (EIP) under which certain stock awards and options would be given to Bancorp officers, employees, and directors. The EIP had certain limits on (1) how much of each classification of stock could be allocated; (2) how much stock could be issued to one employee; and (3) how much stock, in total, could be issued to non-employee directors. The proxy statement stated that, within these limits, the number, types, and amounts of awards would be at the discretion of the board and would not be known until after shareholder approval of the EIP. The shareholders approved the EIP. The board hired a consultant to review stock awards from similarly situated companies. Ultimately, pursuant to the EIP, the non-employee directors received stock options valued at $780,000 and restricted stock valued at over $1.2 million. The average award for non-employees at peer companies was $175,817. Bancorp’s president and CEO received stock options and restricted stock valued at a total of over $16 million. This compensation was seven times more than the CEO earned in the previous year, and was alleged to be 1,759 percent higher than the average executive compensation at peer companies. Finally, Bancorp’s COO received stock options and restricted stock valued at a total of over $13 million. This compensation was nine times more than the COO earned in the previous year, and was alleged to be 2,571 percent higher than similar compensation at peer companies. Certain Bancorp shareholders (plaintiffs) brought suit, challenging the compensation awards. The Delaware Court of Chancery dismissed the complaint on account of the limits contained in the EIP. The plaintiffs appealed.
Rule of Law
Holding and Reasoning (Seitz, J.)
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