Navigating Executive Compensation Lawsuits: What to Look for when Hiring an Expert Witness

Posted: May 14, 2020

In light of the challenges of determining fair compensation for executives, it is no surprise that disputes regarding executive compensation often become the subject of litigation between executives and organizations. Matters of regulatory compliance are often complex and shape the landscape of corporate governance in a dynamic fashion. In the event that compensation-related disputes proceed to litigation, the expert testimony given by an expert witness is critical to the outcome of the case. An expert in executive compensation should be knowledgeable about the wide spectrum of factors that comprise executive pay, including but not limited to base salary, stock options, benefit packages, bonus payments, and shareholder equity. Experts in this field should also have a significant understanding of tax law, government rules, and all aspects of the regulatory landscape surrounding the industry. There are many laws in place that require that the compensation provided to an executive is compliant with certain standards that prevent financial abuse. An executive compensation expert witness should be well-versed with these laws and how they are applied in corporate governance. He or she will be familiar with compensation structures for all stakeholders in an organization, including executives, employees, and the board of directors. Experts in this field are often certified in benefits, renumeration, compensation, and financial analysis. Ideally, the consultant who will be able to render the most effective expert testimony will have knowledge in employee benefits and executive compensation based on their work with large publicly held corporations. An expert with experience dealing with the benefit implications of merger and acquisition transactions, bankruptcies and workouts—ideally in a multinational capacity and across industry sectors—is likely to have more credence in the courtroom than someone whose experience is limited to smaller organizations. When seeking an expert for the role, one might consider consulting with an expert who has experience in counseling pension plans and investment managers in ERISA plan investments and welfare benefit plans. One might also search for an expert who has authored materials pertaining to corporate governance and executive compensation. Examples of matters that might be brought before a court of law include allegations of unfair compensation of executives, termination disputes, age or gender discrimination, and handling of tax consequences. An expert witness may be called to render an opinion as to whether a sales executive with high performance metrics has been verifiably under-compensated relative to a less senior peer whose performance does not justify a higher degree of compensation but who has personal ties to the vice president of the organization. It should be noted that litigation is truly a last resort for handling disputes regarding compensation. In order to preclude misunderstandings or tensions between employers and executives that may later evolve into legal disputes, an employee or employer should consult with an executive compensation consultant before the signing of any contracts in order to ensure a smooth transition and viable roadmap for all parties. To learn more, visit our Contact Page, or contact us directly by email at or by phone at 415-618-6060.