(A case involving the remuneration of directors who hold other positions within the company)

Facts

As the June 28, 1982 Regular Shareholders' Meeting of Y Company a resolution was passed regarding remuneration for directors who occupied other positions in the company which determined that director remuneration should not include remuneration for the other position and that the rate of not more than 12 million yen per month should be raised to not more than 15 million yen per month. X, a shareholder in Y Company who desires to have the resolution declared invalid, brought the present action. In particular, first of all, he claims that while the resolution should determine a clear statement of the separate remuneration to be received by a director for being a director while serving in another position within the company, it does to do so. Secondly, the requirement of a shareholders' resolution regarding remuneration of directors in support of the notion that the remuneration to be received by a director for filling another position within the company cannot be included in his remuneration as a director, constitutes an evasion of Commercial Code Art. 269. Both X's first claim and his second were dismissed. X appealed. Regarding his first claim he argues that the decision that director or board of directors "self-service" abuse can be prevented by having director remuneration be determined bu the Articles of Incorporation or by a shareholders' resolution is theoretically unreasonable, As to the second claim regarding the meeting, he argues that it is error not tot include in a directors remuneration the salary he is to receive for occupying another position within the company. He states that for directors to hold thee right to inspect operations while at the same time acting as the persons being inspected cannot be permitted.

Gist

1. "Because the provisions of Commercial Code Art. 269 include the point of preventing the evil of so-called "self-service" by directors or the board of directors regarding director remuneration, it is possible for the total amount of remuneration for all the directors to be decided by a shareholders' resolution and the concrete distribution of that amount to be entrusted to the board of directors; it is not necessary for the shareholders' meeting to pass resolutions separately determining the remuneration of each director. The reason for this is that even as regards the determination of remuneration to be received by directors who hold other positions in the company, since the system of providing a salary to employees is, at least, clearly established for companies like the defendant appellee company, insofar as that salary is paid for the work done s an employee, it can be said to be the same thing."

2. "As to those cases where a system of providing a salary to employees, as mentioned above, is clearly established, regarding directors who hold other positions in the company, we cannot think that a shareholders' resolution dealing only with directors' remuneration while there are plans to pay a separate salary for the other position held, ill render the shareholders' meeting incapable of performing its supervisory capacity concerning whether the remuneration paid in light of the established meaning of director's duties is too much or not, and therefore it cannot be said that the contents of the shareholders; resolution in this case is an evasion of Commercial Code Art. 269. For regular directors, other than the representative director, to occupy other positions within the company is an essential part of the company and we cannot permit its opposition.

(translation by Vicki L. Beyer)

Temple University Japan