More than two years after Yahoo! made national headlines for giving a $60 million severance package to former Chief Operating Officer Henrique de Castro, who was fired after a short 14-month stint with the company, a Delaware Court granted a books and records request by shareholder Amalgamated Bank to allow an investigation of whether CEO Marissa Miller and the rest of the Yahoo! board mishandled the process of approving his employment arrangement. The decision by Delaware Chancery Court Judge Travis Laster ruled in favor of Amalgamated's March 2015 books and records request, finding that a credible basis existed for the investigation over how de Castro's exit compensation was set when he was hired. According to the New York Times, Judge Laster cited "changes [Yahoo! CEO Marissa] Miller made to de Castro's offer letter that materially increased his compensation" which, Laster continued, was apparently "done without informing the board committee which approved the offer letter." "A board cannot mindlessly swallow information, particularly in the area of executive compensation," he wrote. Amalgamated Bank is a trustee of two funds which own Yahoo common stock and, according to filings, said it wants to investigate whether Yahoo!'s board breached its fiduciary duty to shareholders. Amalgamated has also stated the investigation will help shape its decision as to whether it will pursue a derivative lawsuit, however, Judge Laster cast doubt on Amalgamated's chance of success under the high bar set by the business judgment rule.
Corporate boards and management have traditionally enjoyed business judgement deference over compensation-related decisions unless there are issues with board independence. Of late, however, shareholders have enjoyed success when companies either do not have a formal process for making decisions or, alternatively, the company eschews an established process in making a decision.