I tell my students that corporate waste technically may be a mechanism for defeating the business judgment rule in the absence of any other evidence of lack of compliance with fiduciary duty, but – as one Delaware decision put it – it’s really more theoretical than real.  See Steiner v. Meyerson, 1995 Del. Ch. LEXIS 95.  When my students ask for some kind of real world example of waste, I tell them the facts of Fidanque v. American Maracaibo Co., 92 A.2d 311 (Del. Ch. 1952), where a corporation paid “consulting fees” to a 70-year-old former executive who had recently suffered a stroke that left him sufficiently incapacitated to be noticeable during his deposition.

I assumed that case was sui generis, but it turns out history has a way of repeating, this time in the form of Sumner Redstone’s contract with CBS.  As described in a recent opinion by Chancellor Bouchard, plaintiff stockholders of CBS adequately alleged that the Board made wasteful payments by refusing to terminate Redstone’s $1.75 million contract as Executive Chair once his declining health left him unable to eat or speak, and by designating him Chairman Emeritus – at a $1 million salary – after he resigned from the Executive Chair position.

The decision strikes me as significant not merely because it presents a modern example of waste that I can now offer to my students – at a large, public company no less – but also because CBS is contemplating a merger with Viacom.  Both companies are controlled by the Redstone family via supervoting shares, though they are – purportedly – negotiating the deal via independent committees.  This kind of self-interested transaction was already vulnerable to legal challenge; how much stronger will that challenge be now that there’s already evidence of a supine board willing to cater to Redstone?