The Limits of Ratification: Delaware Supreme Court and Director Equity Incentive Awards

January 2018

Publication| Corporate Transactions| Corporate & Chancery Litigation

The Delaware Supreme Court recently overturned anopinion of the Delaware Court of Chancery holdingthat stockholder approval of an equity incentive planwith broad sub-limits on the number of shares availablefor grant to non-employee directors resulted inthe stockholders’ ratification of subsequent awards tothe directors. In essence, the Supreme Court held thatstockholders’ approval of an equity incentive plan willprovide “advance ratification” of the directors’ decisionsonly where the plan provides for “self-executing” grantsin fixed amounts and on specified terms.

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