Marx v. Akers case brief

Marx v. Akers (N.Y.1996)

FACTS
Action brought charging that outside directors’ pay was excessive.

RULES
According to NY courts, the purposes of requiring demand are:
o Relieve courts from deciding matters of internal governance unnecessarily
o Provide Boards with reasonable protection from harassment
o Discourage ‘strike suits’
Some states (not NY) have a ‘universal demand requirement’ that cuts out excuse
altogether.
New York law says a demand can be excused if:
o Majority of directors are interested in transaction
o Directors fail to inform themselves to a reasonable degree about transaction
(not explicitly in Grimes)
o Directors failed to exercise business judgment in approving transaction
(transaction is egregious on its face)

CONCLUSION
Court rules that plaintiff should NOT be granted an excuse on issue of executive
compensation (despite back-scratching issue)
Court rules that plaintiff should be granted an excuse on the issue of Board
compensation, but even so failed to state a claim upon which relief can be granted
(compensation was not excessive on its face)