Inventive plaintiff lawyers have been trying to use negative say on pay votes as a basis for extorting money from corporations basis for bringing suit to protect investors from excess executive pay. I've deplored this practice before, arguing that there's no federal cause of action and that the state causes of action are bogus (here and here).
Now, as Broc Romanek reports, a federal district court has bounced one of these law suits:
In a decision reaffirming directors' authority to determine executive compensation, the United States District Court for the District of Oregon has ruled that a suit against bank directors arising out of a negative "say on pay" vote should be dismissed. The court determined that plaintiffs failed to raise a reasonable doubt that the challenged compensation was a reasonable exercise of the board's business judgment. This is the first federal court decision to dismiss such an action, a number of which have been filed in state and federal courts across the country in the wake of the Dodd-Frank Act. Plumbers Local No. 137 Pension Fund v. Davis, Civ. No. 03:11-633-AC (Jan. 11, 2012).
... The court also held that the Dodd-Frank Act did not alter directors' fiduciary duties and that a negative "say on pay" vote alone does not suffice to rebut the business judgment protection for directors' compensation decisions. In so holding, the court expressly declined to follow a prior federal court decision which had denied a motion to dismiss in a "say on pay" action in the Southern District of Ohio, NECA-IBEW Pension Fund v. Cox, No. 11-451 (S.D. Ohio, Sept. 20, 2011).
I understand that sharks got to eat, but I still think that the right answer to these suits is not just to dismiss them on the pleadings but also to impose sanctions on the lawyers bringing them. They are utterly lacking in merit.
