Heller v. Boylan

Supreme Court of New York

29 N.Y.S.2d 653 (N.Y. 1941)

Compensation paid to corporate officers may be so large that it constitutes misuse and waste of corporate money.

Relevant Facts

In 1912, a majority of stockholders of the American Tobacco Company adopted a bylaw providing annual incentive bonuses to the president and vice presidents of the company in addition to their salaries. In 1939, the company earned $262 million in sales. Pursuant to the bylaw adopted in 1912, the officers of the company received a total of approximately $11.6 million in bonuses in addition to a total of $3.7 million in salary. Seven stockholders of American Tobacco Company (the plaintiffs) holding a total of 1,000 of the company’s approximately 5,000,000 outstanding shares brought a derivative action on behalf of the company against the company’s directors (the defendants), claiming that the majority stockholders committed waste and spoilation by permitting the large bonus payments and that the payments bore no relation to the value of the services provided by the officers.

Issue

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Holding & Reasoning

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Concurrence

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Dissent

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Last updated:

December 20, 2020

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Procedural History

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Citations

29 N.Y.S.2d 653 (N.Y. 1941)