Grimes v. Donald
Delaware Supreme Court
673 A.2d 1207 (1996)
DSC Communications' board (defendant) approved employment contracts for CEO James Donald (defendant) guaranteeing him employment until age 75, full salary through the contract term if terminated without cause, incentive bonuses, and lifetime medical coverage for him and his family; shareholder Grimes (plaintiff) demanded the board rescind these contracts, and when the board refused, Grimes sued, alleging the board abdicated its oversight responsibility by giving Donald compensation he'd collect regardless of the board's disagreement with his management choices, and separately alleging waste, excessive compensation, and lack of due care -- theories he hadn't raised in his original demand but claimed were excused as futile. The chancery court dismissed for failure to state a claim, and Grimes appealed.
Whether a board's informed decision to grant an executive a generous, difficult-to-terminate employment contract constitutes an abdication of directorial authority, and whether a shareholder whose demand on the board was refused may later assert that demand was excused for other legal theories arising from the same underlying facts.