Executive compensation lawsuits have made headlines multiple times over the past few years, most notably during 2011 and 2012 when opportunistic plaintiff’s attorneys sought to use say on pay as the missing link to piece the protections afforded to compensation decisions by corporate boards. After those suits faded, the infamous Faruqi & Faruqi disclosure injunction suits arose, which sought to use the threat of injunctions to stop annual meetings to force companies into settlements. Neither of these types of suits were anything more than inventive attempts at catching companies off balance and forcing a quick settlement. However, new suits emerged which focused on alleged shortcomings in plan compliance and disclosures. For example, some suits targeted companies for not counting shares properly and thus issuing more shares than were allowable under the plan. Others focused on a lack of 162(m) compliance for certain grants based on a perceived non-compliance with company disclosure.
Recently, Intel appears to have been the target of a strategy similar to the above mentioned “foot fault” suits, as reported in a recent blog by Stinson Leonard Street. According to court filings, a shareholder derivative suit was filed which took issue with the company’s stockholder vote seeking to approve the amendment of the company’s 2006 equity incentive plan to add 33 million shares and extend its terms. According to the complaint, Intel violated the SEC’s proxy laws because the company’s proxy did not identify all classes of eligible participants in the plan. The suit was filed in April 2017 and within a month, the shareholder filed for a voluntary dismissal “with prejudice” which means the shareholder may not re-file the suit. According to the blog, this perhaps indicates a settlement, but, seeing how weak the cause of action was, given the strength and detail of Intel’s disclosure, also could be a sign that the case was going nowhere. Even so, the filing of the suit is a reminder of companies to make sure to be thorough in the drafting and review of plan changes and the correlating disclosures.