473 A.2d 805 (Del. 1984)
Harry Lewis, a stockholder of Meyers Parking System, Inc., brought this derivative action against Meyers and its ten directors, including Leo Fink who owned 47% of the outstanding stock.1 In 1979 Prudential Building Maintenance Corp. spun off its shares of Meyers to Prudential’s stockholders, after which Meyers provided parking lot facilities and related services throughout the country with its stock actively traded over-the-counter.2 Prior to January 1, 1981, Fink had an employment agreement with Prudential that became operable upon his retirement in April 1980, and Meyers agreed to share Fink’s consulting services while reimbursing Prudential for 25% of the fees paid to him, resulting in payments of $48,332 in 1980 and $45,832 in 1981.3
On January 1, 1981, the Meyers board approved a five-year employment agreement with Fink that included an annual salary of $150,000 plus a bonus of 5% of pre-tax profits over $2,400,000, automatic renewal, differing termination rights, post-termination consulting compensation scaling down to $100,000 per year for life, and death benefits.4 The board also approved interest-free loans to Fink totaling $225,000 that remained unpaid as of August 1982 when the complaint was filed.5 Fink was 75 years old when the agreement was approved, and there was no claim that he was in poor health.6
The complaint alleged that the transactions had no valid business purpose and constituted waste of corporate assets because the amounts were grossly excessive, Fink performed little or no services, and the Prudential agreement prevented him from providing his best efforts.7 It further alleged that no demand had been made on the board because all directors participated in and were liable for the wrongs, Fink controlled and dominated every board member by personally selecting each director, and the directors would have to sue themselves.8
Defendants moved to dismiss the action pursuant to Chancery Rule 23.1 for failure to make a demand or demonstrate its futility.9 The Court of Chancery denied the motion.10 The Supreme Court of Delaware granted the defendants’ application for an interlocutory appeal to review the denial of the motion to dismiss.11
Whether a stockholder’s demand upon a board of directors, to redress an alleged wrong to the corporation, is excused as futile prior to the filing of a derivative suit?12
Demand can only be excused where facts are alleged with particularity which create a reasonable doubt that the directors’ action was entitled to the protections of the business judgment rule.13 The court must decide whether, under the particularized facts alleged, a reasonable doubt is created that (1) the directors are disinterested and independent and (2) the challenged transaction was otherwise the product of a valid exercise of business judgment.14
No.15 Harry Lewis alleged that no demand had been made because all directors participated in and were liable for the wrongs, Fink controlled and dominated every board member by personally selecting each director, and the directors would have to sue themselves.16 Fink’s 47% ownership of Meyers’ outstanding stock is insufficient without other facts demonstrating control, as stock ownership alone at less than a majority does not prove domination or control.17 The complaint does not allege particularized facts showing that the five-year employment agreement with Fink, providing $150,000 annual salary plus bonus and post-termination payments scaling to $100,000 per year for life, or the $225,000 interest-free loans constituted waste, given the board’s broad power to fix compensation under 8 Del.C. § 122(5) and authorize loans under 8 Del.C. § 143.18 The bootstrap claim that directors would sue themselves raises no cognizable issue absent particularized facts overcoming the presumptions of independence and proper business judgment.19
The demand is not excused as futile because the allegations fail to create a reasonable doubt as to the applicability of the business judgment rule to the Meyers board.20