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1
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OPINION
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EXTRACTED KEY WORDS
DEMAND COMPENSATION COMPLAINT BUSINESS PLAINTIFF ALLEGES EXECUTIVES EXCESSIVENESS IBM FAILURE BUSINESS CORPORATION LAW TRANSACTION APPELLATE DIVISION YORK DISCRETION ALLEGATIONS DEMAND REQUIREMENT PARTICULARITY BUSINESS JUDGMENT DEFENDANTS DEMAND FUTILITY SHAREHOLDER DERIVATIVE SUITS UNIVERSAL DEMAND BUSINESS CORPORATION ACT DISINTERESTED DIRECTORS RESPONDENTS YORK REPORTS WASTED CORPORATE ASSETS AWARDING EXCESSIVE COMPENSATION |
SYLVIA ADELE MARX, APPELLANT, v. JOHN F. AKERS, ET AL., RESPONDENTS.
Marx v. Akers, 88 N.Y.2d 189, 666 N.E.2d 1034, 644 N.Y.S.2d 121 (1996).
April 25, 1996
2 No. 46(1996 NY Int. 81)
Decided April 25, 1996
_________________________________________________________________
This opinion is uncorrected and subject to revision before publication
in the New York Reports.
John F. Harnes, for Appellant.
Evan R. Chesler, for Respondents.
SMITH, J.:
Plaintiff commenced this shareholder derivative action against
International Business Machines Corporation (IBM) and IBM's board of
directors without first demanding that the board initiate a lawsuit.
The amended complaint (complaint) alleges that the board wasted
corporate assets by awarding excessive compensation to IBM's
executives and outside directors. The issues raised on this appeal are
whether the Appellate Division abused its discretion by dismissing
plaintiff's complaint for failure to make a demand and whether
plaintiff's complaint fails to state a cause of action. We affirm the
order of the Appellate Division because we conclude that plaintiff was
not excused from making a demand with respect to the executive
compensation claim and that plaintiff has failed to state a cause of
action for corporate waste in connection with the allegations
concerning payments to IBM's outside directors.
Facts and Procedural History
The complaint alleges that during a period of declining profitability
at IBM the director defendants engaged in self- dealing by awarding
excessive compensation to the 15 outside directors on the 18-member
board. Although the complaint identifies only one of the three inside
directors as an IBM executive (defendant Akers is identified as a
former chief executive officer of IBM),(n 1) plaintiff also appears
to allege that the director defendants violated their fiduciary duties
to IBM by voting for unreasonably high compensation for IBM
executives.(n 2)
Defendants moved to dismiss the complaint for (1) failure to state a
cause of action, and (2) failure to serve a demand on IBM's board to
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