I'm inclined to disagree on the topic of removing directors. The main statute on point is sect. 142. I think that section doesn't quite explicitly answer the point, but it comes close. It says that officers shall be chosen in such manner and for such terms as are prescribed by the bylaws. That does not speak directly to removal, but it seems to rest basic power for determining how officers are chosen with the bylaws. If the bylaws were to give shareholders rather than the board the power to choose officers, sect. 142 pretty clearly allows that, does it not? That being the case, isn't the power to remove directors closely enough related that the bylaws should be able to give shareholders that power as well?

As for the ability of shareholder bylaws to block amendment by the board, that is a notoriously hard question under the Delaware laws. You can readily argue either side of the issue, and there is dicta supporting each side. As a predictive matter, I suspect you are right about what the Delaware courts will ultimately do. I address this issue more, arguing against Larry's position, in my forthcoming piece on shareholder bylaws. That section of the piece is actually going to get dropped from the final version for space reasons, but the argument is available in the earlier version on ssrn.

Brett, I agree that Section 142 offers a possible textual argument for stockholder removal of officers, but how would you reconcile that power with the broad grant of authority to the board in Section 141(a)? If stockholders can appoint and remove officers, it seems to me that they have substantial management authority, and the Delaware courts seem to guard the board's prerogatives fairly jealously.

Isn't it obvious that stockholders can appoint officers? I am not so sure. Section 142(b) reads: "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."

Does that mean that any procedure "prescribed in the bylaws" would be lawful? Could stockholders amend the bylaws to prescribe appointment of officers by the King of Sweden? I suspect that there are limits to what those bylaws could say, and reading the entire provision suggests to me that "the board of directors or other governing body" has a special role.

Even if stockholders are allowed to appoint officers, does that power necessarily imply the power to remove officers? My sense is that the Delaware courts guard the prerogatives of the board of directors pretty closely, and they are unlikely to read Section 142 in such a way that it implies a power not expressly granted.

Interestingly, we don't have many cases on Section 142, and none on removal by shareholders. In 2004, Vice Chancellor Parson cited 142(b) in observing, "It is well settled that officers of a corporation serve at the pleasure of the board of directors." Of course, 142(b) doesn't say that, either.

What do you have against the King of Sweden? Here in Minnesota we have much respect for things Swedish.

It seems to me that the specific language of sect. 142 is close enough on point that it deserves a lot of weight. Still, I agree with you that Delaware courts are zealous protectors of board power under section 141(a). However, counter-balanced against 141(a) is sect. 109(b), which gives broad powers to the bylaws. I think that John Coffee basically set out the best set of distinctions for resolving the tensions between those two sections. On this question, Coffee's distinctions don't give a terribly clear answer, but I'd argue they point in favor of extending the bylaw power to director removal. The bylaw in question sets out a process for removing directors, and is thus procedural in nature. It also is a matter of corporate governance rather than substantive management--choosing the top officers of a corporation (especially the CEO) is about as central a topic of corporate governance as I can imagine. If a matter is procedural and concerns corporate governance, it falls within the bylaw power as a general rule. That combined with the specific language of sect. 142 suggests to me that this bylaw is valid, although I agree that the courts are enough pro-board power that there is a decent chance that they would go the other way.

Brett, For the sake of others who are reading this exchange, I assume you intended to refer to officer removal, not director removal.

It looks like we are in the same neighborhood. I have probably overstated the case against the stockholder removal power, but I think we agree that the answer is not obvious from the statute.

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The point that seems to have been lost in all of the disputes is that Bally's Total Fitness is losing market sahre, largely due to inability to be competitive and terrible customer service at their facilities. A serious turnaround company should be brought in to address the more global issues that are sinking this company.