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- The Inbox – When Suits Break Bad
- In Reversal of Fortune, Court of Appeals Finds Ambiguity in Executive’s General Release
- Faithless Fiduciary: What Happens WhenThe Employee Responsible For The Purchase Of D&O Coverage Also Commits Fraud?
- The Inbox – Trends in the C-Suite
- L’Oreal Lawyer Claims Company Fired Him When He Wouldn’t Pursue Problematic Patents
- Seeking Coverage Under Your D&O Insurance Policy: What Is A Claim And When Was It Made?
- The Inbox – The “Pao Effect”
- The Fashionable and the Furious: Dov Charney Seeks $40 Million from American Apparel
- Whose Idea Is It? Make Sure Employees Clearly Transfer Ownership Of The Intellectual Property To The Organization Before Parting Ways
- Transition Is Such A Difficult Thing: Crystal Cathedral’s Battle With Its Founder
- "Key Man" Provisions
- After-Acquired Evidence
- Age Discrimination
- Arbitration and ADR
- Breach of Contract
- Campaign Finance
- Change-in-Control Provisions
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- Dodd-Frank Act
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- Executive Compensation
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- Monthly Roundup
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Blogs We Like:
The AmLaw Daily
The BLT: The Blog of LegalTimes
Connecticut Employment Law Blog
The D&O Diary
Delaware Employment Law Blog
DeNovo: A Virginia Appellate Law Blog
The Employer Handbook
Executive Pay Matters
The Federal Criminal Appeals Blog
Grand Jury Target
Screw You Guys, I’m Going Home: What You Need To Know Before You Scream “I Quit,” Get Fired, Or Decide to Sue the Bastards
Trade Secrets & Noncompete Blog
Virginia Appellate News & Analysis
WSJ Law Blog
Showing 38 posts in Executive Compensation.
Federal prosecutors recently indicted David Colletti, a former VP of marketing with MillerCoors LLC, on charges relating to a scheme to embezzle $7 million from the beer brewing giant. Mr. Colletti, a thirty-year veteran of the company, allegedly broke bad by conspiring with others to defraud the company through fictitious invoices for promotional and other events that were never held. According to Law 360, MillerCoors sued its former marketing executive for $13.3 million last year in an effort to recover for the alleged fraud. Prosecutors claim that Mr. Colletti and his co-conspirators used the proceeds to purchase collectible firearms, golf and hunting trips, and—perhaps inspired by Pink Floyd—even bought an arena football team.
Nanoventions Holdings is a Georgia company that designs and manufactures microstructure technology used to prevent the counterfeiting of such things as currency, driver’s licenses, and event tickets. In 2011, $2 million went missing, and an investigation revealed that that its CFO, Steve Daniels, allegedly forged checks and converted funds to his own use as owner of a company called BIW Enterprises. In an interesting twist, BIW is engaged in the business of growing and distributing marijuana in California. According to Courthouse News Service, the company is suing Mr. Daniels for compensatory, treble and punitive damages under Georgia RICO statutes, and related causes of action. If the allegations are true, one might find a historical equivalent to these events in the 1920s, when the president of the Loft Candy Company stole thousands of dollars to buy Pepsi-Cola out of bankruptcy. Loft Candy ended up owning Pepsi on the basis that it was a stolen corporate opportunity. If Georgia shared Colorado’s stance on marijuana legalization, would the court award ownership of the pot business to Nanoventions? Oh what a difference a century makes. Read More ›
Doug Parker, the Chairman and CEO of American Airlines, has just joined a small cadre of executives who earn no salaries. Before anyone starts a GoFundMe page for Mr. Parker, consider that his 2015 compensation consists of 207,672 restricted stock units, the value of which will depend upon the airline’s performance. According to the Wall Street Journal, the stock units could amount to compensation in the range of $10.7 million if calculated using the current stock price of $51.40. By comparison, Mr. Parker earned $12.3 million in 2014, 40% of which was cash in the form of a $700,000 base salary and annual cash incentives. Mark Reilly, head of Verisight, Inc., a firm of executive compensation consultants, told the Journal that this type of compensation structure is more often found in companies facing financial hardship, and the lack of salary is offset by more generous stock awards. In the case of an executive in an established, mature industry, the message seems to be that Mr. Parker believes in the stock and that he is willing to tie his compensation to its performance. Given US Airways’ performance since its merger with American in 2013, this wouldn’t seem like an incredible risk on his part. The combined company “has soared to record profit and its stock has climbed 42% in the past year.” Read More ›
Last summer, we covered in depth the resounding repercussions from American Apparel’s decision to terminate its CEO and founder, Dov Charney. Now, the sequel has arrived – and it promises lots of action.
Matt Townsend of Bloomberg Business reports that Charney has resumed his arbitration against his former employer, in which he is seeking $40 million from the clothing company. Charney previously agreed to put his claims on hold while American Apparel made its final decision about whether to terminate him. After an investigation, the board decided in December to cut Charney loose. Read More ›
Whose Idea Is It? Make Sure Employees Clearly Transfer Ownership Of The Intellectual Property To The Organization Before Parting Ways
In the previous blog post, we discussed the ongoing bankruptcy litigation between Crystal Cathedral Ministries and its founder Dr. Robert Schuller over the rejection of his Transition Agreement. That contract purported to spell out the relationship between the parties as Dr. Schuller stepped aside from his post as senior pastor. The determination of whether that agreement was intended to be an employment agreement, and subject to the strict limitations of section 502(b)(7), or a retirement benefit which is not so limited, is pending before the Supreme Court. However, Dr. Schuller’s case also presented other interesting issues that could be instructive for other employers.
In addition to his claim for damages based on the rejection of the Transition Agreement, Dr. Schuller sought compensation from tCrystal Cathedral (the bankruptcy debtor) in an undetermined amount, for allegedly improper use of his intellectual property. The intellectual property, which consisted of more than 35 years of books, sermons and other writings, had been produced by Dr. Schuller while he was employed by the debtor as its senior pastor. Dr. Schuller, individually and through a wholly owned corporation, asserted a copyright to these materials. Under the Transition Agreement between the debtor and Dr. Schuller, the intellectual property was made available to the debtor for use pursuant to a royalty free license. Read More ›
Transition for corporate leadership is frequently complex. When the transition involves a charismatic founder, this step can be even more stressful. Planning well in advance for the inevitable segue between leaders and outlining the respective roles of both new and departing management can help, but may not fully resolve the issues. A recent decision involving Crystal Cathedral Ministries, the megachurch founded by famed televangelist Dr. Robert H. Schuller, reflects how nuanced this process can be. Because this case presents many issues of corporate succession, it provides a gateway for discussing various employment issues that may crop up in a corporate reorganization. We will focus on the case in a series of articles designed to spotlight these issues.
Dr. Schuller founded the Crystal Cathedral in the 1950s. Later, Crystal Cathedral Ministries was formally incorporated in 1970 with Dr. Schuller as the senior pastor. During his 36-year tenure in this position, Dr. Schuller wrote numerous books and gave countless sermons and other talks, particularly in his role as the executive creator and director of content for The Hour of Power, a weekly television show produced by Crystal Cathedral Ministries. In exchange for these services, Dr. Schuller received a salary and benefits, including a housing allowance and health insurance. Read More ›
Helen of Troy isn’t just a famous mythological beauty. It’s also a publicly-traded maker of personal care products. And now, it and its directors are defendants in a suit by Helen of Troy’s founder, Gerald “Jerry” Rubin.
Executives who bring suit against their former employers frequently want to show that they were terminated for reasons other than performance, and Rubin is no different. In his complaint, as reported by El Paso Inc., Rubin describes the history of Helen of Troy and its staggering growth. From humble origins – a “wig shop in El Paso, Texas” – Helen of Troy grew into a “global consumer products behemoth, generating revenues in excess of approximately 1.3 billion dollars.” And then the roof caved in. Rather than “celebrating [Rubin’s] extraordinary success,” Rubin alleges, Helen of Troy’s directors turned on him in order to save their own skins, and eventually forced him out of the company.
Why did the directors need to sacrifice Rubin to save their positions? According to Rubin, the answer lies with an entity called Institutional Shareholder Services (“ISS”). ISS is a proxy advisory firm that conducts analysis of corporate governance issues and advises shareholders on how to vote. Because shareholders often follow ISS’s recommendations, it can have substantial influence over the affairs of publicly-traded companies. Indeed, some participants in a recent SEC roundtable suggested that ISS could have “outsized influence on shareholder voting,” or even that it has the power of a “$4 trillion voter” because institutional investors rely on it to decide how to vote.
Rubin alleges that if ISS decides a CEO is making too much money, it will demand that the compensation be cut or that the CEO be fired. If its demand isn’t followed, it will “engineer the removal of the board members through [a] negative vote recommendation.” Board members then will cave to ISS’s wishes to preserve their own positions.
Rubin claims that this is what happened in his case. Read More ›
Judge Approves $20 Million in Executive Bonuses From Bankrupt Company, Finding That Incentives Weren't "Lay-ups"
A bankruptcy can be hazardous to the health of an executive’s bonus check. Sometimes, however, an executive can survive an attack on a bonus in a bankruptcy, and come out clean on the other side. For example, we covered here how one executive succeeded in keeping most of his incentive payments based on the timing of those payments.
Now, we have another lesson in how executives can keep their bonus checks despite a bankruptcy, from Judge Christopher S. Sontchi of the U.S. Bankruptcy Court for the District of Delaware. The company at issue in the case was Energy Future Holdings Corp. (EFH), a holding company with a portfolio of Texas electricity retailers. EFH filed for Chapter 11 bankruptcy in April of this year. Read More ›
Last week, we covered the Third Circuit’s decision that Goldman Sachs bylaws didn’t clearly establish a vice president’s right to advancement of his legal fees for his criminal travails. The vice president, software programmer Sergey Aleynikov, isn’t giving up easily, however.
Law360 reports that Aleynikov has filed a petition for panel rehearing or rehearing en banc. In the federal appellate courts, this is a step that parties can take when they disagree with the decision of the three-judge panel that heard their case. In a panel rehearing, the panel can revisit and vacate its original decision; in a rehearing en banc, the entire Third Circuit could consider the issue.
Aleynikov contends in his petition that the panel misapplied a doctrine of contractual interpretation called contra proferentem. In plain English, contra proferentem means that a court will read the written words of a contract against the party that drafted it. The panel in Aleynikov’s case disagreed as to whether under Delaware law (which governs his dispute), the doctrine can be used to determine whether a person has any rights under a contract. The two-judge majority said that it can’t, and therefore refused to use the doctrine when it decided whether Aleynikov – as a Goldman vice-president – fell within the definition of an “officer” entitled to advancement under the company’s bylaws. In dissent, Judge Fuentes asserted that “Delaware has never suggested that there is an exception to its contra proferentem rule where the ambiguity concerns whether a plaintiff is a party to or beneficiary of a contract.”
In his petition, Aleynikov asks the whole Third Circuit to decide who is right: Judge Fuentes or the majority. He also cites additional Delaware cases that he says support his position, including one “unreported case” that was brought to his counsel’s attention “unbidden by a member of the Delaware bar who read an article commenting on the panel’s decision in The New York Times on Sunday, September 7, 2014.” Sometimes, to establish a right to advancement rights, it takes a village.
An Officer or a Vice President: Goldman Sachs Programmer Must Prove Advancement Case to Jury After Appellate Ruling
The case of Sergey Aleynikov, a former vice president at Goldman Sachs, has drawn a lot of media attention, including these prior posts here at Suits by Suits. Aleynikov was arrested and jailed for allegedly taking programming code from Goldman Sachs that he had helped create at the firm. His story even inspired parts of Michael Lewis’s book Flash Boys. A federal jury convicted him of economic espionage and theft, but the Second Circuit reversed his conviction, holding that his conduct did not violate federal law. Now, Aleynikov is under indictment by a state grand jury in New York.
Unsurprisingly, Aleynikov wants someone else to pay his legal bills – Goldman Sachs. And it is no surprise that Goldman, which accused him of stealing and had him arrested, doesn’t want to bear the cost of his defense. In 2012, Aleynikov sued Goldman in New Jersey federal court for indemnification and advancement of his legal fees, along with his “fees on fees” for the lawsuit to enforce his claimed right to fees. As we discussed in this post, indemnification means reimbursing fees after they are incurred, and advancement means paying the fees in advance. Advancement is particularly important for those employees who cannot float an expensive legal defense on their own dime. Read More ›
Last week, American Apparel announced that its board had decided to terminate Dov Charney, the company’s founder, CEO, and Chairman, “for cause.” (We’ve discussed the meaning of terminations “for cause” in prior posts here and here.) The board also immediately suspended Charney from his positions with the company. Although the board didn’t initially disclose the reasons for its action, Charney is not new to controversy; in recent years, he has faced allegations of sexual harassment and assault.
The reasons for Charney’s termination have now become public, and they aren’t pretty. In its termination letter, available here, the board accuses Charney of putting the company at significant litigation risk. It complains that he sexually harassed employees and allowed another employee to post false information online about a former employee, which led to a substantial lawsuit. The board also says that Charney misused corporate assets for “personal, non-business reasons,” including making severance payments to protect himself from personal liability. According to the board, Charney’s behavior has harmed the company’s “business reputation,” scaring away potential financing sources. Read More ›