Zenith Steel Company operates a prosperous business. In January, Zenith’s CEO an

Question

Zenith Steel Company operates a prosperous business. In January, Zenith’s CEO and president, Roe, who is also a member of the board of directors, was voted a $1 million bonus by the board of directors for valuable services he pro- vided to the company during the previous year. Roe received an annual salary of $850,000 from the company. Black, Inc., a minority shareholder in Zenith Steel Company, brings an appropriate action to enjoin the payment by the company of the $1 million bonus. Explain whether Black will succeed in its attempt.

Explanation / Answer

Black Inc.being a minority shareholder have certain rights and veto power to enjoin the payment.US corporate laws and bye-laws have provision that for the best interest of the business and the shareholders a minority shareholder can have certain power to veto in the decision of the majority. In this case Black Inc. though a minority shareholder, have ownership right because of holding share. In this case the CEO is already getting $850,000 as annual salary so if tghe bonus will be more than annual salary then the minority shareholder has right to ask for the reason of such bonus.

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