Last week I wrote about Vice Chancellor John W. Noble’s ruling in Gorman v. Salamone, C.A. No. 10183-VCN (Del. Ch. July 31, 2015) that a stockholder adopted bylaw empowering stockholders to remove officers is invalid.  The stockholder grounded his argument on Section 142(b) of the Delaware General Corporation Law, which provides:

Officers shall be chosen in such manner and shall hold their offices for such terms as are prescribed by the bylaws or determined by the board of directors or other governing body.  Each officer shall hold office until such officer’s successor is elected and qualified or until such officer’s earlier resignation or removal.  Any offer may resign at any time upon written notice to the corporation.

Vice Chancellor Noble, however, found that Section 142(b) does not speak to how corporate officers may be removed and that vesting the power of removal in the stockholders would unduly constrain the Board of Director’s ability to manage the corporation.  The asymmetry of this result is jarring.  For stockholders, choosing officers is ok, but removing officers is not.

Vice Chancellor Noble concludes that if stockholders were allowed to remove officers, then the board could simply replace them, resulting in an endless loop of removal and re-appointment.  However, if Section 142(b) allows the bylaws to specify the manner of selection of officers, why can’t they reserve that power exclusively to the stockholders?