NU Online News Service, May 29, 2003, 12:20 p.m. EDT – A stockholder has sued John Hancock Financial Services Inc., Boston, in the U.S. District Court in Boston.
The suit charges that Hancock illegally used steep pay raises to reward Chief Executive David D’Alessandro and four other top managers for taking the company public in 2000.
The lawsuit was brought on behalf of Aaron Landy Jr., a shareholder from Southlake, Texas, by Boston attorney Jason Adkins, a frequent Hancock critic.
Court papers filed by Adkins cite recent criticism of Hancock by life insurance industry financial analysts, charging that Hancock directors this year awarded top executives what they said was the highest pay in the industry despite a 15% drop in Hancock’s net income and a 32% decline in Hancock’s share price.
Hancock’s compensation committee chairman stated recently that the raise was given at least partly to reward the executives for Hancock’s strong stock performance in the first year after its initial public offering, the lawsuit charges.
The suit maintains that the company’s plan of reorganization specifically excluded rewarding executives for company performance in the year following its demutualization.
“Moreover, the directors directly benefited from the same improper conduct by ? accepting significant compensation, including a substantial increase over the prior year, based on Hancock’s stock performance during the prohibited one-year period,” the suit says.
In a statement, Hancock says it intends “to defend [against] this nuisance lawsuit vigorously.”
None of Hancock’s officers was compensated for the IPO during Hancock’s first year of operation as a publicly traded company, Hancock says.
“The compensation committee made its decisions independently, and all of those decisions were permissible and appropriate under the plan of demutualization,” Hancock says.