DLA Piper's director compensation shareholder litigation risk mitigation action steps are noteworthy for their focus on process, internal documentation/record-keeping, and disclosure best practices, including:
- Using compensation consultant-provided peer reviews, and closely reviewing the criterion used to identify peers
- Documenting the philosophy underlying the award sizes and terms to show how the Compensation Committee used the peer review and historical grant history to set amounts
- Reviewing proxy disclosure to ensure that shareholder communications clearly reflect a process that is fair and balanced
- Evaluating whether to add formulaic provisions to equity plans to determine the size of director awards to limit board discretion
- Making certain that the reasoning behind any significant departures from past grant cycles is clearly outlined in all shareholder communications, including the proxy disclosure
- Considering grant date dollar limitations, which aren't impacted by fluctuating share prices and thus may be a more objective expression of value than limits expressed as a number of shares
The firm's memo: "2019 Proxy Season Hot Topics: Part 4 – Diversity disclosure and executive compensation" also addresses action steps relating to the SEC's new board diversity disclosure C&DIs, Tax Act-triggered changes to IRC Section 162(m), perk disclosure, and more.