Business Judgment Rules The Roost In Exec Pay Analysis
Law360, New York (April 5, 2013, 10:43 AM EDT) -- The Delaware Supreme Court recently upheld a Delaware Chancery Court ruling holding that a company’s board of directors did not commit corporate waste in implementing a bonus plan under which payments to executives would not be tax deductible to the company under Internal Revenue Code Section 162(m) (Section 162(m)).
In its Jan. 14, 2013, decision in Freedman v. Adams, the court focused on the board’s exercise of its business judgment in affirmatively choosing not to adopt a more tax efficient Section 162(m)-compliant bonus plan in order to retain flexibility in its structuring of incentive compensation arrangements. This ruling affirms both the...
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