HOUSTON — Cheniere Energy has reached a tentative settlement with investors that would put restraints on its executive compensation.
This follows shareholder litigation over Cheniere’s pay practices after CEO Charif Souki’s received a compensation package last year that was worth $142 million.
In four separate lawsuits filed in Delaware, investors aimed to wrestle $1.8 billion in stock awards away from executives and employees, claiming that the Houston liquefied natural gas firm did not abide by Delaware law or its own bylaws last year when it nearly tripled its grants under a 2011 compensation plan. The additional shares awarded in the vote were included in the 2013 compensation packages.
The accord with plaintiffs, subject to court approval, was disclosed in regulatory filings Thursday, and would end the litigation if approved. If approved, it would prohibit Cheniere from paying out any remaining shares it had authorized in a February 2013 vote but hadn’t yet distributed to executives or employees. It wouldn’t require Souki or any employees to give up awards already received — amounts the company did not disclose.
Cheniere can hold a new shareholder vote on the remaining shares, according to the memorandum of understanding, but Souki cannot be awarded more than 1 million of those shares – worth $73.75 million on Thursday.
Cheniere said it couldn’t reasonably estimate its potential losses tied to the litigation, if any. It had no further comment beyond the regulatory filing. Jeffrey Golan, a Philadelphia attorney who represents plaintiffs in the case, declined to comment.
The accord also would bar Cheniere from seeking shareholder approval for any stock-based compensation before Jan. 1, 2017, “such that no stock compensation will be awarded to company executives, directors or consultants” other than awards already approved by shareholders or authorized by a Delaware court, pending the court’s approval of the agreement with shareholders.
Souki had been awarded $133 million in shares in 2013. The shares vest over time and as long-term project goals are reached. His 2013 pay package was the highest of any U.S. chief executive’s in 2013, according to the Associated Press.
In a bid to unwind the awards, shareholders had called the stock grants excessive and improper, and had claimed Cheniere should have, but did not, count abstentions as “no” votes in a 2013 stockholder vote to boost the grants under the 2011 compensation plan from 10 million to 35 million shares.
They said Cheniere had breached its fiduciary duty and claimed “unjust enrichment.” Cheniere had argued it had followed stock exchange rules in the shareholder vote last year, and that yanking the awards would cause “significant harm” to the company and its shareholders.”
Under the deal, stockholder votes on compensation through September 2022 would require abstentions to be counted as “no” votes, a rule that was central to investors’ lawsuits. The deal would also require its compensation committee to be comprised only of independent directors.
In September, Cheniere failed to garner enough votes to pass the advisory, non-binding shareholder vote on its 2013 compensation, a measure called “say-on-pay” that, in the post-financial crisis world of increased regulation, is considered shareholders’ most effective tool in bending companies to their will. The company in June said it would exclude from the shareholder vote a measure it had proposed earlier — bolstering executive and employee stock awards by 30 million shares, worth $2.2 billion on Thursday.
Cheniere shares dipped 72 cents on Thursday to $73.75 on the New York Stock Exchange.
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