Federal Court Rejects Shareholder “Say-on-Pay” Suit

March 14, 2012
In the wake of shareholder “say-on-pay” votes mandated by the Dodd-Frank Act in 2011, numerous derivative complaints were filed against directors and officers of issuers who suffered negative votes. A federal court in San Jose recently dismissed one “say-on-pay” case, holding that the negative shareholder vote alone did not rebut the business judgment presumption to excuse demand under Delaware law, establishing a national trend. This update examines the decision, which represents the first judicial pronouncement regarding the weight courts should afford “say-on-pay” votes.