Free

Ralph Lauren fends off pension fund lawsuit…

Earlier this year, Michelle wrote a post about an interesting lawsuit that the City Pension Fund for Firefighters and Police in Pembroke Pines, Florida, had filed in the fall of 2011 against Ralph Lauren (RL). As a quick recap from that post, the pension fund (which owns stock in Ralph Lauren) filed a complaint in New York State Supreme Court

“…against the company’s directors and certain executives for ‘waste of corporate assets by the Company’s directors for permitting excessive compensation to, and alleged related party transactions with, the Company’s Chairman and Chief Executive Officer and certain other executives, and unjust enrichment by these executives.'”

The pension fund sought damages from the company, as well as the “disgorgement of excessive compensation and benefits of related party transactions,” as well as legal costs and attorneys’ fees.

But late last Wednesday, Justice Lawrence Marks issued a ruling here dismissing the suit. The court’s decision stated in part:

“There is no question that the issue of executive compensation is generally left to a corporation’s board to determine. This court will not put itself in the position of the board and decide from the bench what a board should do.

“The specifics proffered by plaintiff in this action, both with regard to the individual board members, which plaintiff does address, and with regard to specific business decisions, including but not limited to compensation, do not give this Court either a basis for a reason to sit in the place of the board, at least at this time. It may well be that we will all be here again following a demand on the board, but now is not that time.”

Over the years, we’ve footnoted more than a few excesses at Ralph Lauren (see here and here, for example) so while we weren’t in court to hear the arguments, we’re familiar with some of the headlines. Stephen Radin, a partner at Weil in New York served as lead counsel for the company.

What will really be interesting is whether this is really the end of the dispute between the parties or if someday in the future we find a disclosure about such a demand made by the pension fund to the board in a future SEC filing. But at least for now, the board’s decisions stand. Whether investors approve — Ralph Lauren’s stock has performed nicely against indexes and its competitors in recent years, though the shares are down sharply from March highs — remains to be seen.

But perhaps even more interesting is whether this will make pension funds and other activists think twice about filing a case again, instead of opting for more of a behind-the-scenes approach.

Image source: Ralph Lauren website

——-

Reading filings has always been more of an art than a science. At footnotedPro we provide subscribers with the most actionable signals through timely, exclusive reports. Don’t miss out on the hidden signals that other investors overlook — email us for more information, or to inquire about a trial subscription.