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NECA-IBEW Pension Fund v. Cox

2011 U.S. Dist. LEXIS 106161 (2011)

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NECA-IBEW Pension Fund v. Cox

United States District Court for the Southern District of Ohio
2011 U.S. Dist. LEXIS 106161 (2011)

Facts

Cincinnati Bell, Inc. (company) experienced disappointing financial results in 2010, suffering a more than $61 million net-income decline, 28 percent earnings-per-share decline, share-price decline from $3.45 to $2.80, and negative 18.8 percent shareholder return from the prior year. Nevertheless, the company’s board (directors) (defendants) awarded the company’s chief executive officer $4 million in bonuses and $4.5 million in salary and other compensation. As required by the Dodd-Frank Wall Street Reform Act, in March 2011, the directors submitted a nonbinding resolution to the company’s shareholders seeking their approval of the company’s 2010 executive compensation. The shareholders overwhelming voted against the resolution. Relying on, among other things, the shareholders’ negative vote, the NECA-IBEW Pension Fund (fund) (plaintiff) filed a shareholder-derivative suit claiming that the company’s directors breached their fiduciary duties by approving substantial compensation to the company’s senior executives despite the company’s poor financial performance, in violation of the company’s pay-for-performance compensation policy. The directors moved to dismiss the complaint, arguing that the suit was barred by the business-judgment rule.

Rule of Law

Issue

Holding and Reasoning (Black, J.)

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