Richards Layton & Finger

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

January 2018

The Delaware Supreme Court recently overturned an opinion of the Delaware Court of Chancery holding that stockholder approval of an equity incentive plan with broad sub-limits on the number of shares available for grant to non-employee directors resulted in the stockholders’ ratification of subsequent awards to the directors. In essence, the Supreme Court held that stockholders’ approval of an equity incentive plan will provide “advance ratification” of the directors’ decisions only where the plan provides for “self-executing” grants in fixed amounts and on specified terms.