Shareholder Disputes Bank Directors’ Bonuses

(CN) — A shareholder of Delaware-based Investors Bank claims that 12 directors gave themselves "grossly excessive" pay packages last year that were much higher than bonuses given at similar banks.

Michael Logan, who claims to own just over 4,000 shares of Investors Bank stock, sued the directors of Investors Bancorp Inc. in Delaware Chancery Court on May 12.

Logan names CEO Kevin Cummings, COO Domenick Cama and 10 other directors as defendants, who he claims all got "lavish" and "unfair" stock awards and payment packages.

Logan says that, in 2015, "the non-employee directors granted themselves a total compensation package valued at an average of $3,846,835 per director, an amount that was grossly excessive when compared to what directors in similar positions have been paid for their services."

He claims that compensation package "equated to a staggering 2,616 percent increase when compared to the $147,040 average compensation the company's non-employee directors received in 2014."

In addition to being inconsistent compared to previous annual salaries at Investors Benk, Logan claims that 2015's average director pay "was approximately 2,385 percent more than the $161,179 average compensation paid to non-employee directors at peer companies."

Logan claims Cummings and Cama were in on the plan.

"As the only two employee directors on the board, Cummings and Cama were the only people who had the ability to object and prevent the board's non-employee members from overpaying themselves," the 30-page lawsuit states.

But that didn't happen, according to Logan.

"The board's decision to award Cummings and Cama stock awards valued at $16.7 million and $13.3 million, respectively, was not based on valid business reasons, but rather was part of an express or implied quid pro quo arrangement pursuant to which the board awarded Cummings and Cama a lavish package so that they would not object when the non-employee directors awarded themselves their grossly excessive compensation," the complaint alleges.

Logan says the excessive equity awards given to Cummings and Cama "were awarded on the same day that the non-employee directors granted themselves $3,574,000 each." (Emphasis in original.)

"While the non-employee directors were in the process of giving themselves a 2,616 percent raise from their 2014 compensation, they quieted Cummings and Cama by giving them a 286 percent and 370 percent increase from their 2014 compensation, respectively," according to the complaint.

Logan claims that "both Cummings and Cama were long-serving company employees and did not previously need such massive awards in order to perform their jobs," and says that "the compensation committee offers no explanation as to why suddenly in 2015, Cummings and Cama needed millions of shares of stock."

When broken down further, the numbers demonstrate just how disproportionate the compensation was, according to Logan.

He claims the board met only 12 times in 2015, meaning that "each director received on average $320,570 for every meeting they attended."

By paying themselves that much per meeting, Logan says the directors made more for attending just one meeting than directors in all but one of the company's peer group made for all of 2015.

Investors Bank did not immediately respond to a request for comment on the claims.

Logan seeks damages for breach of fiduciary duty and unjust enrichment. He is represented by Jeffrey Gorris with Friedlander & Gorris in Wilmington, Del.

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