Heller v. Boylan
Supreme Court of New York
29 N.Y.S.2d 653 (1941)
In 1912, virtually all of the 62,000 stockholders of the American Tobacco Company adopted an incentive compensation by-law, which permitted large bonuses to be paid to the president and vice presidents of the company each year, in addition to their salaries. The company is a giant industrial enterprise, with sales in 1939 amounting to $262,416,000. Between 1929 and 1939 the officers of the company, pursuant to the 1912 by-law, received a total of $3,784,999.69 in salaries and $11,672,920.27 in bonuses. Seven of the company’s stockholders (plaintiffs), holding fewer than 1,000 of the company’s total 5,074,076 shares, brought a derivative action on behalf of the company against the company’s directors (defendants), claiming that the majority stockholders, against the minority’s protests, committed waste and spoliation in permitting large bonus payments that bore no relation to the value of services being given.
Rule of Law
Holding and Reasoning (Collins, J.)