Court Opinion

ID: 5405112
Source: CourtListenerOpinion
Date Created: 2022-01-08 15:59:13.018961+00
Date Added: 2024-06-11T08:30:33.554338
License: Public Domain

Gaynor, J.:
Directors of a corporation have no right to vote salaries to themselves as mere incidents to their offices, as was done here. They are not, however, debarred from becoming employees of the corporation, and they are entitled to a reasonable compensation for their services as sneh. But as in fixing their compensation they are in the position of trustees dealing with themselves in respect of their trust, their action is subject to question by the stockholders, and to review by a court of equity at the suit of a stockholder. In the case of a large board of directors, the fixing of the salary of one of their number for prescribed services might be deemed conclusive, where the influence of the one employed was obviously not a factor therein. This case is quite different. At the same meeting three separate resolutions were passed fixing salaries for all of the directors. That each one refrained from voting on the resolution fixing his salary does not change the case. Too much importance is attached to that formality. Wool is not so easily pulled over the eyes of the law. All was done under the same arrangement.
Before the passing of the resolution of May, 1897, the system of so-called salaries was nothing but a division of earnings, for under it all of the stockholders were paid in proportion to their holdings of stock. It is therefore no precedent for the said later resolution.
The difficulty of the ease arises from the meagreness of the evidence as to the services rendered by two1 of the directors, and of the value of the services. But I think that $5,500 is a fair compensation for all of the services rendered by the three directors, including their expenses therein.
Judgment accordingly.