Court Opinion

ID: 9624398
Source: CourtListenerOpinion
Date Created: 2023-08-22 07:01:57.430829+00
Date Added: 2024-06-11T11:52:22.728950
License: Public Domain

*343Finley, J.
(concurring in the result)—In this case, the question of the stockholders’ alleged rights to employment must be determined on the basis of the interpretation to be given those provisions of the corporate by-laws which read as follows:
“Art. I, § 8 (a) The owner of 20 or more shares of Class A stock and/or the owner of 25 or more shares of Class B stock shall be eligible for employment by the corporation and shall have the first preference right of employment.”
“Art. I, § 9 (b) Nothing herein contained shall take from the Directors the right to employ other than shareholders or to discharge one or more employees, although shareholders, with or without cause, which, in their discretion, is necessary for the best interest of the corporation.”
One purpose in the organization of the corporation was to provide a “make work” program for stockholders. Certainly, one other purpose was the establishment of an efficient, sound, and successful business operation. There is some possible inconsistency in the two concepts, particularly if one or the other, or both, should be emphasized to an extreme degree. The above-quoted by-laws were drawn in an effort to provide for the “make work” idea, and also for the idea of sound business management. Consequently, inherent in the by-laws is the possible inconsistency, heretofore mentioned. Perhaps there was considerable sales talk regarding employment rights in connection with the sale of corporate stock and the raising of funds to finance the particular corporate promotion. Whatever the sales talk may have been, attention must be focused upon the applicable provisions of the by-laws, as pointed out above, in determining just what, if any, employment rights are acquired through the purchase of stock.
In one sense, it could be said that the promise respecting employment rights, contained in Art. I, § 8 (a), is illusory because the language of Art. I, § 9 (b), in effect, as a practical matter, cancels out any employment rights. However, it seems more apt that the promise of employment rights should be characterized as bona fide rather than illusory, but nevertheless subject to certain conditions and limitations, *344namely, the exercise of discretion by the directors in the interest of sound business management. In other words, a stockholder may be eligible and have some preference as to employment rights without such rights being absolute in nature. Certainly, if it had been intended to confer absolute rights to employment, the by-laws might easily have so provided. The key to this seeming dilemma lies in placing proper emphasis upon the provisions of Art. I, § 9 (b), which permit the exercise of discretion and sound business judgment by the board of directors in personnel and employment matters. This may seem severe and undesirable as to Mr. Schoblom, but at the same time it may be most desirable, generally, as to other stockholders, particularly in terms of their interest that the corporation be successful in a business sense.
Art. I, § 9 (b), permits the corporate directors to employ other than stockholders, if, in their discretion, such is in the best interests of the corporation. Applicants for employment, other than Mr. Schoblom, the appellant, would fall either in the category of (a) stockholders, or (b) nonstockholders. As to the stockholders, Mr. Schoblom would have equal preference rights but no seniority or priority; consequently, the corporation could employ other stockholders than Mr. Schoblom, whether they were under or over forty-five years of age, and he could not complain. As to nonstockholders, under Art. I, § 9 (b), the corporation could employ only those under forty-five years of age as against giving employment to Mr. Schoblom and he still could not complain, because Art. I, § 9 (b) permits the directors to employ other than stockholders, if, in their discretion, such is in the best interests of the corporation. It would be difficult to show that the rule to employ men under forty-five years of age was not sound from the standpoint of business efficiency in a plant of the kind here involved, or that such rule constituted breach of trust or abuse of discretion, considering the language of the by-laws, above quoted. Lastly, if the corporation employs neither additional stockholders nor non-stockholders, it is difficult to see how Mr. Schoblom could complain.
*345After careful analysis of the above-quoted provisions of the by-laws, it is my feeling that Mr. Schoblom has some preference regarding employment rights; that these are not absolute in nature but, on the contrary, are subject to the exercise of discretion and sound business judgment by the directors. For the reasons stated herein, I believe the majority opinion reaches the correct result.
Schwellenbach, J., concurs with Finley, J.