Gaillard

I

Statement of the Case

These shareholder derivative actions arise from the merger of Natomas Company (Natomas) into Diamond Shamrock Corporation (Diamond), effective August 31, 1983. By their complaints, appellant Tilly Gaillard, a common stockholder of Natomas, and appellant Vincent J. Ashton, a common stockholder of Diamond, challenge the purported “golden parachute” agreements and other benefits provided for five inside directors of Natomas as part of the merger.

Golden parachutes are special termination agreements that shelter executives from the effects of a corporate takeover. Their emergence has been attributed to the dramatic increase in the size of corporate takeovers and the volume of hostile takeovers. (See Note, Golden Parachutes: Untangling the Ripcords (1987) 39 Stan.L.Rev. 955, 957-958, fn. 14 (hereafter Ripcords); Note, Golden Parachutes: Executive Employment Contracts (1983) 40 Wash. & Lee L.Rev. 1117, fn. 1.) Typically, golden parachutes provide senior executives who are dismissed or who, under certain circumstances, resign as a result of a takeover with either continued compensation for a specified period following the executives’ departure or with…