Appeals from decree of Court of Common Pleas of Allegheny County, Oct. T., 1967, Nos. 2095, 2096 and 2097, in case of June Bermann v. Harry Meth et al.
Edward Goldberg, with him Samuel J. Pasquarelli, and Goldberg & Pasquarelli, for appellants.
John A. Metz, Jr., with him A. A. Bluestone, and Metz, Cook, Hanna & Kelly, for appellee.
Bell, C. J., Jones, Cohen, Eagen, O'Brien, Roberts and Pomeroy, JJ. Opinion by Mr. Justice Cohen.
This is a derivative action brought by the owner of one-third of the shares of the McCloy Company alleging that Harry Meth, the company's president, received excessive salaries for the years 1960-67, inclusive.
Appellant, Meth, was a co-founder of the company which is engaged in the office furniture and supplies business and has been connected with it as an officer since 1915. Appellee's father was also a co-founder, and upon his death on December 26, 1959, she inherited a one-third interest.
The lower court found as fact that between January 1, 1960, and December 31, 1966, Meth received as
salary the following amounts: 1960 -- $21,200; 1961 -- $21,200; 1962 -- $21,465; 1963 -- $21,465; 1964 -- $21,870; 1965 -- $21,465; 1966 -- $21,465. From January 1, 1967, through May 31, 1967, Meth received $410 weekly, and from June 1, 1967, to October 9, 1967, the weekly payment was $300. It also found that during this period appellant and his son, Melvin Meth, were responsible for the administration of the business, including personnel work, advertising, buying, supervision of selling and the payment of bills. During these years, Meth (aged 73 in 1960) worked approximately fifty to sixty hours per week. In November, 1966, he became ill and did not work until February, 1967, after which time he worked a reduced day of approximately five hours.
The court below concluded that the salaries paid were excessive and constituted a waste of corporate assets. The basis of that finding seems to have been appellant's age and his ill health at the time of trial. It held that because appellant devoted less than half the time to the business as did the vice-president, Melvin Meth, that a fair and reasonable salary should be estimated on the basis of one-half the salary paid to Melvin Meth, whom it found assumed the responsibility of running the company. It then ordered one-third of the excess to be paid to appellee.
In actions alleging excessive compensation, the general rule is that "(A) salary must bear a reasonable relation to the officer's ability and to the quantity and quality of the services he renders." 19 Am. Jur. 2d, Corporations § 1412 at 804-05 (1965); Black v. Parker Manufacturing Co., 329 Mass. 105, 106 N.E. 2d 544 (1952). There is no generally accepted ...