I want to say a few words about Chancellor Chandler and his jurisprudence as well.  Many have already covered some of the most prominent of his opinions, like Disney, about which so many of us have written.  He has two other interesting opinions in which executive compensation, an issue of increasing public importance and focus (hello Occupy Wall Street), figures prominently.

The two opinions are Ryan v. Gifford, 918 A. 2d 341 (Del. Ch. 2007) and In re Citigroup, Inc. Shareholder Derivative Litigation, 964 A.2d 106 (Del. Ch. 2009).  I value these opinions for several reasons.  First, these are classic “Chandler” opinions, measured in tone, careful of the parties, strategic and clear.  Second, the opinions might well be the beginning of some groundwork on executive compensation, an area that some believe Delaware has ceded.  And, third, the opinions are about executive compensation and are not abdications.  Did I mention executive compensation already?  I think it is worth mentioning more than once.

In Ryan v. Gifford, Chancellor Chandler was faced with various claims, including some about stock options backdating.  As is well known, by itself, backdating is not illegal – misrepresenting compensation, failing to disclose it, and allocating in contradiction to an established policy, however, can be.  Chancellor Chandler makes this point in the Ryan v. Gifford opinion and declines to dismiss the case on that basis. 

To those hungering for more dramatic action, I say, this is Delaware after all.  That said, the action is, dramatic.  It is a response to the backdating crisis.  The crisis, was, of course, first and foremost, a governance crisis.  We can argue about the greed or deceit behind the backdating crisis, but I hope many of us would agree that if the directors had all been in the room, discussing the act of backdating and what it really meant (rather than signing consents in lieu of meeting), the outcomes may well have been different.  That sort of conversation, which Chancellor Chandler pointed out as a flaw in the Disney process, is key to directors doing their jobs.

The Citigroup opinion arose out of another crisis, the financial crisis.  There are many issues in the case, most of which the plaintiffs lost.  They did, however, succeed in surviving the motion to dismiss on one key issue – an allegation about waste in the CEO’s payment package. Succeeding in pleading demand futility is relatively rare.  The claim was essentially that the directors had wasted assets in approving a $68 million retirement payment and benefit package for the former CEO who, the plaintiffs alleged, was responsible for the billions in losses.  Given the allegations, and the losses of Citigroup, Chancellor Chandler found that the plaintiffs at least deserved discovery and a further opportunity to explore the claim. 

Again, many might say that refusing to dismiss one small claim is a small move in the larger world of Occupy Wall Street.  It was not, however, a small move for Delaware.  Indeed, arguably, it was a smart, strategic, and legally correct move.  It makes a statement:  executive compensation should actually be crafted with limits.  And, the opinion was crafted by a very judicious and circumspect Chancellor.  Indeed, it’s classic Chancellor Chandler and represents just one example of why he will be missed. 

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