Zapata Corporation had a share option plan that permitted its executives to purchase Zapata shares at a below$-$market price. Most of the

directors participated in the share option plan. In $1974,$ the directors voted to advance the share option exercise date in order to reduce

the federal income tax liability of the executives who exercised the share options, including the directors. An additional effect, however,

was to increase the corporation$$s federal tax liability.

William Maldonado, a Zapata shareholder, believed that the board action was a breach of a fiduciary duty and that it harmed

the corporation. In $1975,$ he instituted a derivative suit in a Delaware court on behalf of Zapata against all of the directors. He did

not make a demand on the directors to sue themselves, alleging that this would be futile because they were all defendants.

The derivative suit was still pending in $1979,$ when four of the defendants were no longer directors. The remaining directors then

appointed two new outside directors to the board and created an Independent Investigation Committee consisting solely of the two new

directors. The board authorized the committee to make a final and binding decision regarding whether the derivative suit should be

brought on behalf of the corporation. Following a three$-$month investigation, the committee concluded that Maldonado$$s derivative suit

should be dismissed as against Zapata$$s best interests.

Zapata asked the Delaware court to dismiss the derivative suit. The court refused, holding that Maldonado possessed an individual

right to maintain the derivative action and that the business judgment rule did not apply. Zapata appealed to the Supreme Court of

Delaware