Facts

The board of directors of Y Company, at a meeting on July 15, 1969, consented to the payment of retirement bonuses to retiring directors and auditors calculated, according to the "usual practice" of the board, by multiplying a "merit degree percentage" -- determined for the purpose of adding a merit bonus to the retirement bonus--times the term of office times the maximum annual remuneration received; the minutes of that meeting merely recorded the board's consent to the above " usual practice," without stating what that practice was. The June 29, 1977 Shareholders' Meeting of Y Company, resolved that the matter of presenting retirement bonuses to two directors retiring effective the closing of the meeting, in particular the amount and time and manner of presentation, should make the determination within a suitable scope, according to the standard of previous amounts and taking various matters into consideration. Based on the directive of the shareholders' resolution, the board of directors, meeting that same day after the shareholders' meeting, resolved that the chairman of the board and the president/director should have sole responsibility for determining, according to the above "usual practice," a suitable amount bases of the merits of the retiring director, as well as the time and manner of presentation. Based on this resolution, the chairman of the board and the president/director determined the amount of retirement bonus to be presented to both retiring directors. X, a shareholder of Y Company, brought the present action seeking to have the above board of directors' resolution declared invalid as a preparatory claim to having the above shareholders' resolution declared invalid. The lower court dismissed X's claim, holding that if there was a clear statement or an implication of the standard by which the directors were to determine the amount of retirement bonus tp pay, there was no need for the shareholders themselves to determine a maximum limit to that amount and that the failure to enter a codification of the content of the "usual practice" in the minutes of the board of directors lacks adequacy and produces a condition under which the shareholders might desire to have the existence of a "usual practice" and its contents explained, but that since the chairman and the president charged with determining the amount of the retirement bonus did not increase the amount of that bonus in spite of having the discretion to do so, both the shareholders' resolution and the board of directors resolution are effective. The court of second instance also dismissed X's appeal, ,in response to which X brought this jokoku appeal claiming that for the shareholders' meeting to entrust determination of the retirement bonus to the board of directors without imposing a maximum limit on that violates Commercial Code Art. 269 and that for the board of directors to entrust the determination to the chairman and the president without deciding the amount, etc., in concrete terms, in contravention of the shareholders' resolution, violates the directors' duty of care.

Gist

Jokoku appeal dismissed.

As is stated in the facts above....as found by the court of first instance, the above shareholders' resolution regarding an increase in the retirement bonus does not violate Commercial Code Art. 269, and the above directors' resolution does not go against either Commercial Code Art. 269 or the purpose of the shareholders' resolution. There is no illegality in the process and we can approve as proper the decision of the original court that neither resolution can be said to be ineffective.

(translation by Vicki L. Beyer)

Temple University Japan