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Investors Bancorp Inc. directors don’t have to face shareholder claims that they awarded themselves too much pay, the Delaware Chancery Court ruled April 5 ( In re Investors Bancorp Inc. Stockholder Litig. , 2017 BL 111738, Del. Ch., No. 12327-VCS, 4/5/17 ).
Shareholders have targeted director compensation in a number of recent lawsuits in Delaware. The chancery court’s latest ruling provides more guidance on when the “stockholder ratification defense” will apply. Under the doctrine, Delaware courts apply the more deferential business judgment rule when directors’ approval of their own compensation is supported by shareholders.
In the case, two shareholders alleged that Investors Bancorp directors breached their legal duties by awarding themselves substantial restricted stock and stock options worth millions of dollars.
In dismissing the lawsuit, Vice Chancellor Joseph Slights III found that Investors Bancorp’s equity incentive plan contained “meaningful, specific limits on awards to all director beneficiaries.” He also found that the Short Hills, N.J.-based bank’s shareholders were fully informed of all material facts before voting to approve the plan.
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The decision is available at http://www.bloomberglaw.com/public/document/IN_RE_INVESTORS_BANCORP_INC_STOCKHOLDER_LITIGATION__No_12327VCS_2
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