A shareholder has sued John Hancock Financial Services, Boston, in federal district court, charging that the company illegally used steep pay raises to reward CEO David F. DAlessandro and four other top managers for taking the company public in 2000.
The lawsuit was brought on behalf of Aaron E. Landy Jr., a shareholder in Southlake, Texas, by Boston attorney Jason B. Adkins, a frequent critic of Hancock.
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 15.4% drop in net income and a 32.4% decline in share price.
The companys compensation committee chairman stated recently that the raise was at least partly to reward the executives for Hancocks strong stock performance in the first year of its IPO, the lawsuit charges.
The suit maintains that the companys 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 byaccepting significant compensation, including a substantial increase over the prior year, based on Hancocks stock performance during the prohibited one-year period,” the suit says.
In a statement, Hancock says it intends “to defend this nuisance lawsuit vigorously.”
None of its officers was compensated for the IPO during its first year as a publicly traded company, the statement maintained.
“The compensation committee made its decisions independently, and all of those decisions were permissible and appropriate under the plan of demutualization,” Hancock stated.
Reproduced from National Underwriter Life & Health/Financial Services Edition, June 2, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.