Corporations can define shareholder voting rights by setting limits on certain classes of stock, the U.S. Court of Appeals for the Third Circuit has ruled. Although the issue had been long settled in Delaware corporate law, the appellate court’s precedential decision adopts the regulation as federal law.
Robert Freedman, a Viacom Inc. shareholder, filed a lawsuit in the U.S. District Court for the District of Delaware alleging the company’s executive compensation program was corporate waste because a portion of it was not a tax-deductible business expense. Typically, corporate taxpayers are able to deduct executive compensation over $1 million if approved by the board and a majority of shareholders.
