Corporations - Management

Corporations - Management - BUSINESS LAW II Corporations...

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    BUSINESS LAW II Corporations – Management
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    Corporate Objectives Traditional Rule:  Corporations must be  managed to maximize return to the shareholders Modern Rule.  Corporations can be managed in  a way that allows the corporation to act as a  good corporate citizen This means that corporations can donate to charities  and act engage in other activities that are not  necessarily directly related to profit maximization The modern rule allows the board of directors to make  decisions in the best interest of the corporation,  instead of acting for short-term profit maximization
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    Corporate Powers Modern corporation statutes are very  flexible, and allow corporations to  engage in any activity
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    Corporate Powers  (Cont.) Traditionally, corporations had to state  their purpose in the articles  Eventually, corporation laws allowed  corporations to state their purpose as  “any lawful business”  Today, modern corporation statutes,  automatically give corporations the power  to conduct “any lawful business.”
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    Ultra Vires  Doctrine The  Ultra Vires  doctrine applies when a  corporation acts beyond the powers  specified in the articles Ultra Vires  means “beyond the powers”
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    Ultra Vires  Doctrine  (Cont.) Historically, this was a defense that  either the corporation or a third party  could assert to avoid a corporate  obligation incurred that were outside of  the corporation’s powers
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    Ultra Vires  Doctrine  (Cont.) The modern  ultra vires  doctrine has limited  application Under the MBCA, for example, the doctrine can  be applied only by: Shareholders.  A shareholder that wants to prevent  the corporation from engaging in activity that is  ultra  vires Corporation.  The corporation may sue its directors  for losses caused by acting outside of the  corporation’s power Attorney General.  The attorney general can act to  enjoin an  ultra vires  act or to dissolve a corporation  that is acting in excess of its powers
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    The Board of Directors Corporations are managed under the  direction of the board of directors
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    Types of Directors Outside Directors Directors that are not officers or employees of the  corporation Historically, outside directors made up 50% of a  typical publicly held corporation’s board. Today, most  publicly held corporation’s are managed by boards  made up primarily of outside (and, theoretically,  unbiased) directors Inside Directors Officers or employees of the corporation Typically, the directors of close corporations are inside  directors
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    Types of Directors 
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This note was uploaded on 05/04/2008 for the course BUAD 495 taught by Professor Mamun,todd during the Spring '07 term at USC.

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Corporations - Management - BUSINESS LAW II Corporations...

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