In Re Inv’rs Bancorp, Inc. Stockholder Litig.

177 A.3d 1208 (2017)

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Nature of the Case

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Facts

Ps are stockholders of Investors Bancorp, Inc. (D). Ds fall into two groups-ten non-employee director defendants and two executive director defendants. The board sets director compensation based on recommendations of the Compensation and Benefits Committee (Committee), composed of seven of the ten non-employee directors. Non-employee directors were compensated by (i) a monthly cash retainer; (ii) cash awards for attending board and board committee meetings; and (iii) perquisites and personal benefits. The annual compensation for all non-employee directors ranged from $97,200 to $207,005, with $133,340 as the average amount. Cummings, the President, and CEO, received (i) a $1,000,000 base salary; (ii) an Annual Cash Incentive Award of up to 150% of his base salary contingent on certain performance goals; and (iii) perquisites and benefits valued at $278,400, which totaled $2,778,700. Cama, the Company's COO, and Senior Executive Vice President, received annual compensation consisting of (i) a $675,000 base salary; (ii) an Annual Cash Incentive Award of up to 120% of his base salary; and (iii) perquisites and benefits valued at $180,794, which totaled $1,665,794. The Committee met to review 2014 director compensation and set compensation for 2015. A compensation consultant presented evidence that peer companies paid their non-employee directors an average of $157,350 in total compensation. The Committee recommended that the non-employee director compensation package remain the same for 2015. The only change was to increase the fees paid for attending committee meetings from $1,500 to $2,500. The Committee recommended an increase in the executive 2015 Annual Cash Incentive Award from 150% to 200%, and 120% to 160% of base salaries. The board proposed a 2015 EIP. D reserved 30,881,296 common shares for restricted stock awards, restricted stock units, incentive stock options, and non-qualified stock options for the Company's 1,800 officers, employees, non-employee directors, and service providers. A maximum of 4,411,613 shares could be issued or delivered to any one employee. A maximum of 3,308,710 shares could be issued or delivered to any one employee as a restricted stock or restricted stock unit grant; and the maximum number of shares that may be issued or delivered to all non-employee directors, in the aggregate was 30% of all option or restricted stock shares available for awards. According to the proxy, the number, types, and terms of awards under the EIP were subject to the discretion of the Committee and would not be determined until subsequent to stockholder approval. The stockholders approved the EIP, and the Committee held the first of four meetings and eventually approved awards of restricted stock and stock options to all board members. The board awarded themselves 7.8 million shares. Non-employee directors each received 250,000 stock options-valued at $780,000-and 100,000 restricted shares-valued at $1,254,000; Cashill and Dittenhafer received 150,000 restricted shares-valued at $1,881,000-due to their years of service. The non-employee director awards totaled $21,594,000 and averaged $2,159,400. Peer companies' non-employee awards averaged $175,817. Cummings received 1,333,333 stock options and 1,000,000 restricted shares, valued at $16,699,999 and alleged to be 1,759% higher than the peer companies' average compensation for executive directors. Cama received 1,066,666 stock options and 600,000 restricted shares, valued at $13,359,998 and alleged to be 2,571% higher than the peer companies' average. Ps filed three separate complaints in the Court of Chancery alleging breaches of fiduciary duty by the directors for awarding themselves excessive compensation. Ds moved to dismiss under Court of Chancery Rule 12(b)(6) for failure to state a claim and under Court of Chancery Rule 23.1 for failure to make a demand before filing suit. The Court of Chancery granted both motions and dismissed Ps' complaint. Ps appealed.