Jentz 11e-IM-Ch39 - Chapter39 Title BusLawSeal.eps Creator...

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Chapter 39 CORPORATIONS—Directors, Officers, and Shareholders See Separate Lecture Outline System I NTRODUCTION Sometimes, actions that benefit a corporation as a whole do not coincide with the separate interests of the individuals making up the corporation.  In considering those situations, it is important for your students to be aware of the rights and duties of the participants in the corporate enterprise.  This chapter focuses on the rights and duties of directors, managers, and shareholders and the ways in which conflicts between and among them are resolved.  The duty of care and duty of loyalty owed by directors, the business judgment rule and the immunity it provides directors from honest mistakes, and the duty owed by majority shareholders to the corporation and minority shareholders are among the topics. A DDITIONAL  R ESOURCES A UDIO  & V IDEO  S UPPLEMENTS 255
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256           INSTRUCTOR’S MANUAL TO ACCOMPANY  BUSINESS LAW , ELEVENTH EDITION The following  audio and video supplements  relate to topics discussed in this chapter— PowerPoint Slides To highlight some of this chapter’s key points, you might use the Lecture Review PowerPoint slides compiled for Chapter 39.
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CHAPTER 39:  CORPORATIONS—DIRECTORS, OFFICERS, AND SHAREHOLDERS           257 C HAPTER  O UTLINE I. The Roles of Directors and Officers Directors act for and on behalf of their corporation, but no individual director can act as an agent to bind the corporation, and directors collectively control a corporation in a way that no agent can control a principal.  Directors hold positions of trust and control over their corporation, but, unlike trustees, they do not own or hold title to property for the use and benefit of others. A. E LECTION   OF  D IRECTORS The number of directors is stated in the articles or bylaws. Close corporations may eliminate the board altogether. The incorporators, or the corporation in the articles, appoint the first board, which serves until the first shareholders’ meeting. A majority vote of the shareholders elects subsequent directors. Directors typically serve for a year or more. 1. Removal of Directors A director can be removed for cause (and usually not without cause). 2. Vacancies on the Board of Directors A vacancy can occur through a director’s death or resignation or if a new position is created. B. C OMPENSATION   OF  D IRECTORS There is no inherent right to compensation, but many states permit the articles or bylaws to authorize   it,   and   in   some   cases   the   board   can   set   its   own.   Directors   may   set   their   own compensation [RMBCA 8.11]. A director who is also a corporate officer is an inside director. A
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