Eagle Bulk Shipping Inc. Directors Hit By Investor Lawsuit Alleging Breaches Of Fiduciary Duty

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Company Name(s): 
Eagle Bulk Shipping
Case Name: 
Eagle Bulk Shipping Shareholder Derivative Action 06/13/2011
Case Status: 
Lawsuit Filed
Affected Securities
NASDAQ: EGLE
Lawsuit Overview
Type of Lawsuit: 
Shareholder Derivative Action
Date Filed: 
06/13/2011
Summary: 

June 10, 2012 (Update) -- The defendants moved to dismiss the plaintiffs’ complaint on two grounds, only one of which was granted.

The court found the allegations were sufficient to “call into question whether the compensation was fair to the corporation when approved, the good faith of the directors setting those rates, or that the decision to set the compensation could not have been a product of valid business judgment.”

June 13, 2011 -- An investor in shares of Eagle Bulk Shipping Inc. (NASDAQ: EGLE) filed a lawsuit against directors over alleged breaches of fiduciary duties by certain current and former directors and officers of Eagle Bulk Shipping.

According to the complaint the plaintiff alleges that compensation of certain directors and officers at Eagle Bulk Shipping is oversized. In fact, while for the three year period from 2008 to 2010 the total executive compensation was approximately $65.8million and the total director compensation was approximately $6.4million or approximately 60%of the combined Net Income of Eagle Bulk Shipping Inc. for the same three-year period, its share price fell from$34 to $5, or dropped by 85%.

In fact, even though Eagle Bulk Shipping’s annual Total Revenue rose from $124.81million in 2007 to $265.04million in 2010, its Net Income fell from $52.24million in 2007 to $26.84million in 2010. Despite an increase in its first quarter Revenue from $54.24million a year earlier to $86.69million, its first quarter Net Income fell from $4.57million last year to a first quarter Net Loss of $5.81million in 2011.

Furthermore, shares of Eagle Bulk Shipping Inc. (Public, NASDAQ:EGLE) fell from as high as over $35 during May 2008 to recently roughly $2.50 per share.

However, the CEO, Chairman and President of Eagle Bulk Shipping received a combined total compensation of over $52.5million between 2008 and 2010, its CFO earned a combined total compensation of over $4.1million over the same time frame, and the CEO’s brother earned as a director of Eagle Bulk Shipping Inc and President of Eagle Shipping International (a wholly-owned subsidiary of Eagle Bulk Shipping Inc) between 2008 and 2010 a combined total compensation of over $8.9million.