Decisions by Directors on CEO pay based on revenue over short performance periods are being called into question. Alternatives are available, including basing CEO pay on return on the shareholders' investment and over a longer period of time than is currently used by most Directors.
It seems clear that deliberately or negligently choosing a pay scheme for CEOs based on a model detrimental to shareholders while other, superior models are available is a breach of fiduciary obligations at common law or in equity. This is a pretty clear result at least in most jurisdictions outside of Delaware, for example.
Is there an Exclusion for D&O Coverage of such Directors' conduct, such as an excluded breach of fiduciary duties for example?
The issues of CEO pay, performance periods, and Directors decisions concerning them are raised by Gretchen Morgenson, "Fair Game / Directors Disappoint By What They Don't Do" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, May 12, 2013).
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