What are your thoughts about executive compensation? What are your thoughts on the legal regulations mentioned in the excerpt? TouchsTone What Must a Shareholder Allege in Order to Inspect Corporate Records?

Assignment Question

One of the Touchstone excerpts in Chapter 38 discussed Executive Compensation. The excerpt discusses legal regulations on executive compensation. Based on various sources found, the average CEO-to-worker pay ratio was claimed to be about 70-to-1. What are your thoughts about executive compensation? What are your thoughts on the legal regulations mentioned in the excerpt? TouchsTone What Must a Shareholder Allege in Order to Inspect Corporate Records?

This topic is often the subject of litigation. If the bar is set too high for the shareholders, then they may not be able to access information needed to show that the directors have violated a fiduciary duty. If the bar is too low, corporations would have to spend considerable amounts of time and money disclosing information that is not germane to any credible inquiry. In one case, the court provided a good method of balancing competing interests when deciding what level of proof is necessary to have a corporation make the necessary disclosures. A shareholder made a request for specific sets of information, and the corporation declined to provide the information requested. The shareholder sued the corporation, asking the court for an order granting access. The Delaware Supreme Court affirmed the denial of the share-holder’s request. In the opinion, the court indicated the shareholder must establish, under state law, a “credible basis” to infer wrongdoing on the part of the directors before the shareholder has a right to inspect. This credible basis was deemed to strike the proper balance between the right of shareholders to access and the right of the corporation to deny access where the request is based solely on speculation. Under this standard, an allegation of general mismanagement of the corporation would be insufficient. The court applied the standard to the facts of this case, where a shareholder alleged that proposals from a firm to buy the corporation were improperly rejected. The court found the shareholder had submitted no evidence to indicate the board was not making a good business decision in rejecting the offer; the only offering of “belief” that the directors were acting improperly was that impropriety was a “logical conclusion” according to the shareholder. Source: City of Westland Police & Fire Retirement System v. Axcelis Technologies, Inc. 1 A. 3d 281 (Delaware Supreme Court, 2010).