Failed Say-on-Pay Votes Spur Lawsuits

Litigation highlights need to communicate pay policy effectively.

Dodd-Frank required companies to give their shareholders a vote on the pay packages provided to top executives, but it characterized that as an advisory vote. Still, a number of companies whose say-on-pay resolutions failed to win majority support this year subsequently are facing compensation-related lawsuits from their investors.

Just 37 companies, or less than 2%, failed to win majority support on say-on-pay proposals this year, according to the Council of Institutional Investors. Investors filed lawsuits citing the say-on-pay vote against nine of those companies, including Cincinnati Bell, Dex One, Hercules Offshore, Janus Capital and Johnson & Johnson. The lawsuits target not only the companies, but also board members and executives.

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