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Shareholder Lawsuits Push for More Pay Disclosure

Joe Mont | February 12, 2013

Investors are pushing for more executive compensation disclosure at some companies, and they are taking a novel approach to getting it.

Shareholders have filed a wave of lawsuits, leveraging the Dodd-Frank Act's requirement that they get an advisory vote on executive compensation, to demand even greater disclosures and are threatening to enjoin annual meetings if they don't get it. The lawsuits claim that some companies aren't providing enough compensation information—or that it is inaccurate—for investors to make sound judgments during “say-on-pay” votes.

So far, investors have filed approximately 20 such lawsuits on the grounds that companies are breaching their fiduciary duty by failing to provide more complete and accurate compensation data. And more are likely on the way. The majority of the cases, although filed in the state of California, are using Delaware law as their basis.

Even when cases are settled and dropped, as nearly all of them have been,...

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