In this class action brought in the Santa Clara County Superior Court, the plaintiffs sought to enjoin a shareholder vote on Symantec’s “say-on-pay” proposal. The plaintiffs claimed that Symantec’s proxy failed to disclose essential information, including the analyses performed by a compensation consultant and the company’s compensation risk assessment. These allegations are similar to ones seen in mergers and acquisitions (M&A) shareholder litigation, where plaintiffs often seek to enjoin a vote on a merger on the grounds that the disclosure is inadequate. This case is part of a growing litigation trend, in which plaintiffs challenge not the executive compensation itself, but the disclosures about executive pay in annual proxy statements.
Cornerstone Research and Professor Robert Daines of the Stanford Law School were retained by Fenwick & West, counsel for Symantec, to evaluate the plaintiffs’ allegations of inadequate “say-on-pay” disclosures. Professor Daines and Cornerstone Research collected information on the disclosure practices of high-technology companies to compare the plaintiffs’ requested disclosures to established industry practices. They found that the information that the plaintiffs requested about the peer group was actually never disclosed by the sample firms, and that most of the other allegedly necessary disclosures were included in only a minority of similar proxies. Based on this study, Professor Daines concluded that Symantec’s disclosures were at least as detailed as the industry standard.
In his expert report, Professor Daines also explained the Dodd-Frank disclosure requirements and compared these to the plaintiffs’ allegations. In addition, Professor Daines explained that the economics of an advisory “say-on-pay” vote are fundamentally different from those of a merger vote and therefore warrant a very different standard for an injunction decision.
The court denied the plaintiffs’ injunction, citing Professor Daines’ analysis.