Chapter 31

Executive Compensation in the Litigation Setting

Eli Bartov

Lynda H. Schwartz*

31.1 Introduction

Practitioners encounter executive compensation issues in a variety of litigation contexts, including those in which the nature and extent of executive compensation is the crux of the issue. Sometimes, litigation swirls around the executives and their performance. Unlike the routine employment litigation associated with the rank and file, litigation related to an individual executive's pay and employment can be high-profile and require significant expert analysis. In other matters, executive compensation often plays an indirect but nonetheless pivotal role. As litigants make claims involving corporate conduct and possible corporate wrongdoing, they frequently bring collateral claims associated with the corporate acts of the senior executives. Similarly, regulators often focus on the actions of executives and gatekeepers in their analysis of potential wrongdoing. In those cases, executive compensation provides a supporting role, and is analyzed as a potential incentive for wrongdoing or even as the fruits of a crime. While executive compensation has many of the same characteristics as the compensation offered to other employees, executive compensation packages are more complex because they likely include hard-to-value equity, performance-based elements and perquisites, and are more valuable than those offered to the rank and file. These facts, together with the authority and ...

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