Two recent Delaware cases affirm difficulty in challenging board of directors' decisions regarding executive compensation decisions.
Two recent Delaware cases confirm that the Court of Chancery will not substitute its judgment for that of a disinterested and informed board on executive compensation decisions, including severance, so long as there is a rational basis for the board’s decision. Reaffirming its reliance on the business judgment rule, the court decided in favor of the board’s decision in two recent derivative actions challenging severance/retirement packages for departing employees.
Zucker v. Andreessen
In Zucker, the court granted defendant Hewlett-Packard’s motion to dismiss on claims that HP’s directors committed corporate waste by approving a $40mm severance package for its former CEO, Mark Hurd. In ruling, the court found that there was some rational basis for the board of directors to decide that the…