Court Holds Compensation Committee Had No Duty to Alter Compensation After Failed Say-On-Pay Vote

by Leonard, Street and Deinard – Dodd-Frank and the Jobs Act on 10/9/2012

[author: Steve Quinlivan]
In 2011, 52% of Dex One Corporation’s shareholders voted against Dex One’s 2010 executive compensation as disclosed in its proxy statement.  Plaintiff Brad Haberland subsequently commenced a derivative action claiming, among other things, that Dex One’s directors breached their fiduciary duties when the directors failed to alter or amend the compensation plan after the failed say-on-pay advisory vote.
The United States District Court, E.D. North Carolina, Western Division dismissed the claim.  In so doing, the court referred to the plain language of the Dodd-Frank Act which states “The shareholder vote referred to in subsection[] (a),” however, “shall not be binding on the [corporation] or the board of directors of [the corporation], and may not be construed. . . as overruling a decision by such [corporation] or board of directors [,]. . . to create or imply any change to the fiduciary duties of such [corporation] or board of directors[,] . . . [or] to create or imply any additional fiduciary duties for such [corporation] or board of directors. . . .”
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