Scope
Roger in this thorough examination discusses a civil cause of action alleging corporate waste arising from grants of corporate executive compensation or executive separation benefits. The article devotes substantial attention to Delaware law on derivative actions seeking redress for waste of corporate assets, reflecting Delaware’s longstanding status as the predominant choice as state of incorporation for American businesses. The article also traces the strong influence of Delaware law, relating to claims of corporate waste, on the law of other states, and as well as on decisions in federal courts. In addition, the article provides practitioners and other readers with a compendium of statutes and court rules governing derivative suit proceedings for corporate waste in all 50 states and the District of Columbia.
The expansion of the economy in the United States from the end of World War II through the first decades of the 21st century has seen the pay of top corporate executives far outpace improvement in the personal income of typical wage-earners. Forbes magazine has reported that in the 1950s, a typical CEO made 20 times the salary of his or her average worker. By 2017, Forbes reported, “CEO pay at an S&P 500 Index firm soared to an average of 361 times more than the average rank-and-file worker ….” D. Hembree, “CEO Pay Skyrockets to 361 Times That Of The Average Worker,” Forbes, May 22, 2018 (citing Executive Paywatch project report from AFL-CIO). In 2024 and 2025, the AFL-CIO reported, the top 20 CEO pay packages ranged from $61 million to $189 million paid for a single year to individuals named.
Derivative shareholder litigation, together with regulatory enforcement, have at times briefly slowed the ascent of CEO pay packages to ever greater heights. As a test of whether extremely high sums in executive pay constitute actionable corporate waste, then, the derivative lawsuit is an instrument which may have effect to varying extents. Court rules, legislation and judicial decisions have brought the derivative action into the 21st century with parameters intended to strike a balance between self-interested dynamics of capitalism and a competing ethos of accountability to which directors and officers may be held.
Roger’s detailed examination of this topic provides a comprehensive practice guide for attorneys representing parties pursuing or defending claims of a waste of corporate assets through excessive executive pay or severance. Thomson Reuters’ West Publishing Company published this practice guide in book form and online, in May 2026. It is cited as, Cause of Action for Waste of Corporate Assets Through Grant of Executive Compensation or Separation Benefits, 122 Causes of Action 2d 209 (2026).
Table of Contents
I. INTRODUCTION
- §1. Scope
- §2. Background
- §3. Related and alternative actions
II. SUBSTANTIVE LAW OVERVIEW
- A. Prima Facie Case
- §4. Substantive elements, generally
- §5. Elements — defendant exchanged or gave away corporate assets
- §6. Elements — transfer was for disproportionately small or no consideration
- §7. Elements — transfer lacked rational or proper corporate purpose
- §8. Procedural requirements for derivative action
- B. Defenses
- §9. Defenses, generally
- §10. Defenses — defense relating to shareholder status
- §11. Defenses — defense relating to “fair representation” requirement
- §12. Defenses — procedural — defense relating to requirement of demand that directors initiate suit
- §13. Defenses — procedural — “demand futility” as exception to demand requirement
- §14. Defenses — procedural — statute of limitations
- §15. Defenses — procedural — laches
- §16. Defenses — procedural — forum non conveniens
- §17. Defenses — substantive — ratification
- §18. Defenses — substantive — substantial consideration in good faith
- §19. Defenses — statutorily provided — exculpatory charter provisions
- §20. Defenses — equitable defenses
- §21. Defenses — equitable — Bangor Punta doctrine
- C. Parties
- §22. Parties which may recover
- §23. Parties which may be held liable — directors
- §24. Parties which may be held liable — others
III. PRACTICE AND PROCEDURE
- A. In General
- §25. Procedural matters, generally
- §26. Erie doctrine and choice-of-law rules
- §27. Demand
- §28. Verification
- §29. Standing (derivative versus direct action)
- §30. Federal subject matter jurisdiction
- §31. Personal jurisdiction
- §32. Venue
- §33. Security for defense expenses
- §34. Motions to dismiss, generally (Fed. R. Civ. P. Rules 8, 9, 12, 23.1)
- §35. Motions to dismiss — pleading requirements
- §36. Motions to dismiss — pleading requirements — as to affirmative defenses
- §37. Motions to dismiss — admissibility of extrinsic evidence under Rule 12(d)
- §38. Summary judgment disfavored
- §39. Claim preclusion (res judicata)
- §40. Issue preclusion (collateral estoppel)
- §41. Discovery
- §42. Stay of proceedings
- §43. Arbitration
- §44. Attorney-client privilege
- §45. Issues related to appointment of counsel
- §46. Waiver
- §47. Jury trial, verdict and judgment
- §48. Standards of review
- §49. Court supervision of settlement
- B. Proof
- §50. Proof, generally
- §51. Burden of proof, generally
- §52. Presumption — business judgment rule
- §53. Shifting proof burden — overcoming business judgment rule
- §54. Burden of proof — determination of best interests of corporation
- §55. Expert testimony
- §56. Judicial notice
- C. Remedies
- §57. Remedies for corporate waste, generally
- §58. Accounting
- §59. Rescission
- §60. Damages, disgorgement and restitution
- §61. Injunctive relief
- §62. Dissolution
- §63. Receivership
- §64. Constructive trust
- §65. Pre-judgment interest
- §66. Attorney’s fees
- §67. Creditor recourse
- §68. Damages award survey
IV. PRACTICE CHECKLISTS
- §69. Checklist — plaintiff
- §70. Checklist — defendant
V. APPENDIX
- §71. Statutes and court rules of the 50 states and the District of Columbia
- §72. Sample opinion synopsis
- §73. Sample complaint — derivative action