Walter Wyrick Jr., a Nutrisystem shareholder, filed a suit in the U.S. District Court for the Eastern District of Pennsylvania against Nutrisystem’s board of directors. Wyrick alleges that the company failed to uphold its shareholder “say on pay” policy when it gave company executives pay increases even though shareholders voted against them primarily due to “abysmal” stock prices. Despite this vote, Wyrick claims, the board of directors increased CEO, Joseph Redling’s compensation by 50% and CFO David Clark’s by 90%.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 granted shareholders the right to vote on pay increases for executives contingent on good performance. However, in May 2011, 60% of shareholders voted against Nutrisystem’s proposed pay packages because the company’s stock price dropped nearly a third- or 70% since 2007.