Sylvia A. Marx, Appellant, v. John F. Akers et al., Respondents., 88 N.Y.2d 189

Summary

A shareholder alleged that the board wasted corporate assets and that the directors engaged in self-dealing by awarding excessive compensation to company executives and outside directors during a period of declining profitability. The court found that because only three directors were alleged to have received the benefit of the compensation scheme, a majority of the board was not "interested" in it. The allegations that the board used faulty accounting procedures to calculate executive compensation levels were "conclusory allegations of wrongdoing" insufficient to excuse demand. The court did find that a director who voted for a raise in directors' compensation was always "interested" because that person received a personal financial benefit from it. Consequently, a demand was excused as to the allegations that the compensation set for outside directors was excessive. The court held, however, that the allegations that the compensation bore no relationship to duties performed or to the ...