Opinion ID: 2034219
Heading Depth: 1
Heading Rank: 2

Heading: Powers of Delegation Conferred by Articles and By-Laws of Defendant Corporation.

Text: We next turn our attention to the relevant provisions of the articles of incorporation and by-laws of the defendant corporation which relate to the power to delegate corporate authority. Sections 1 and 2 of article VI of the articles of incorporation provide: Section 1. The affairs of this corporation shall be governed and conducted by a board, consisting of not less than three (3) nor more than fifteen (15) directors, who shall be elected by the stockholders at the annual meeting of the corporation and shall hold office for one year and until their successors are elected and qualified, subject to control or change by action of the stockholders. Section 2. The officers of this corporation shall be a president, chairman of the board, one or more vice presidents, a secretary, and a treasurer, who shall be elected by the board of directors on the day of and immediately following the adjournment of the annual meeting of the stockholders, or as soon as practicable after the adjournment of said meeting. Two or more offices, except those of president and vice president, may be filled by the same person. The board of directors may also appoint such assistant officers, superintendents, managers, and other agents, as may be authorized by the by-laws or by resolution of the board of directors; provided, however, that the action of the directors in these respects shall be subject to control or change by action of the stockholders. (Emphasis added). Sections 3.2 and 3.3 of the by-laws of the corporation provide: 3.2 The Board of Directors, by resolution, may designate two or more Directors to constitute an Executive Committee. The Executive Committee shall have and may exercise all authority of the Board of Directors, except that the Executive Committee shall have no authority to take those actions specifically prohibited by law. 3.3 The Board of Directors, by resolution, may designate from among its members such other committees of the Board of Directors, each of which shall have and may exercise such authority of the Board of Directors as the resolution of the Board of Directors may provide. When these articles of incorporation and by-laws are considered in conjointment with the power to delegate corporate authority conferred by the organic corporate law, we are satisfied that they suffice to confer upon independent directors the power to delegate to a special litigation committee, acting according to the standards assumed in the certified question, the powers which that question includes. We note that the form of the inquiry by the federal court relates to chapter 491 corporations with articles of incorporation and by-laws similar to those involved here. Obviously, as it affects the defendant corporation, our answer must be qualified as a result of the implications which flow from the right to control or change appointments by directors conferred upon the stockholders of the corporation by section 2 of article VI. We conclude that for purposes of the appointment of agents of the corporation authorized by the by-laws, this proviso serves to reverse the ordinary rule against direct participation in corporate decisions by stockholders. We believe it embraces the action of the defendant directors in appointing the special litigation committee. We express no opinion with respect to what procedural mechanisms, if any, might be used to secure required stockholder approval or waiver of the stockholders' rights of control for purposes of implementing the business judgment rule.