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Amalgamated Bank v. Yahoo! Inc.
Delaware Court of Chancery
132 A.3d 752 (2016)
Marissa Mayer, CEO of Yahoo! Inc. (Yahoo) (defendant), hired Henrique de Castro as Yahoo’s COO. Mayer consulted Yahoo’s board of directors (board) and Compensation and Leadership Development Committee (committee). The committee approved an offer to de Castro, albeit without significant discussion about the relationships between the various equity awards de Castro would receive. When de Castro sought changes to the offer, Mayer mischaracterized to the committee the original offer, and the committee agreed to the requested changes. The committee did not directly discuss the financial magnitude of the requested changes. After the committee’s approval, Mayer made additional changes to the offer, significantly increasing de Castro’s compensation, without obtaining board approval. The offer stated that if de Castro was terminated without cause, he would keep all of the equity compensation he had received. If Castro was terminated with cause, he would forfeit his equity compensation. de Castro’s performance was subpar, and he was fired without cause 14 months after he started. The board did not consider firing de Castro for cause. de Castro’s severance payout was worth approximately $60 million. Amalgamated Bank (Amalgamated) (plaintiff), a Yahoo stockholder, served Yahoo with a demand to produce its books and records in connection with the compensation of its officers and directors. Yahoo produced documents reviewed by the board and the committee, but declined to produce anything else. Amalgamated filed suit based on Delaware General Corporation Law § 220, seeking court-ordered production of the requested documents. Amalgamated’s stated purpose was to investigate de Castro’s hiring and firing.
Rule of Law
Holding and Reasoning (Laster, J.)
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