Chap039 - Chapter 39 Corporations Directors Officers and Shareholders Chapter 39 Corporations Directors Officers and Shareholders CHAPTER OVERVIEW This

Chap039 - Chapter 39 Corporations Directors Officers and...

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Chapter 39 - Corporations: Directors, Officers, and Shareholders Chapter 39 - Corporations: Directors, Officers, and Shareholders CHAPTER OVERVIEW This chapter focuses on the roles of directors, officers, and shareholders. This chapter will help students, as many of them will participate in corporate America, playing at least one of these roles. Students know very little about directors and officers. They tend to know more about shareholders. Start this chapter’s conversation by seeing what students already know and don’t know. LEARNING OBJECTIVES After reading this chapter, students will be able to answer the following questions: 1.Why is it important to regulate the interactions among directors, officers, and shareholders withina corporation?2.What is the role of a director, an officer, and a shareholder?3.What are the duties of directors, officers, and shareholders?4.In what ways can a director, officer, and shareholder be held liable?5.What are the rights of directors, officers, and shareholders? LECTURE NOTES WITH DEFINITIONS What is the role of a director, an officer, and a shareholder? Teaching tip : Review what students remember about corporations from prior chapters. Roles of directors, officers, and shareholders: o Directors must get approval of other directors before the company will begin to move in a particular direction. o Shareholders use a majority vote to elect directors. o Corporate articles or bylaws specify the number of directors the corporation will appoint. o A quorum must be present at a director’s meeting if decisions are to be valid. o Directors appoint, supervise, and remove corporate officers as they see fit. o Directors are responsible for financial decisions and authorizing corporate policy decisions. o Officers are the executive managers the board hires to run the organization. o Officers act as agents of the corporation. o Shareholders must approve major corporate decisions. o Shareholders have the power to elect and remove the board of directors. o Shareholder meetings occur once a year. What are the duties of directors, officers, and shareholders? Duties of directors, officers, and shareholders: o Directors and officers have a fiduciary duty of care. o Directors and officers must make decisions that have rational purposes. 39-1
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Chapter 39 - Corporations: Directors, Officers, and Shareholders o Directors and officers have a duty of loyalty, e.g., they cannot engage in self-dealing. o They also have a duty to disclose conflicts of interest. o Shareholders also have fiduciary duties to the corporation, and the minority shareholders. Frieda H. Rabkin v. Philip A. Hunt Chemical Corp. (briefed below) considers whether the duties of majority shareholders to minority shareholders. In what ways can a director, officer, and shareholder be held liable?
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  • Spring '12
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