ch38

West's Business Law with Online Research Guide, 9th Edition

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DIRECTORS – PT. I A corporation is governed by a board of directors who are (1) elected by the corporation’s shareholders, (2) to serve for a period of time , and subject to early removal only for cause , (3) compensated as provided for in the articles or by- laws, (4) entitled (a) to receive reasonable notice of and to participate in all board meetings, (b) to inspect all corporate books and records, and, (c) in most jurisdictions, to be indemnified by the corporation for any judgment entered against them, and for any legal fees and expenses incurred defending claims made against them, for acts taken in their directorial capacity. (5) responsible for (a) declaring and paying corporate dividends , (b) authorizing major corporate decisions, (c) appointing, supervising, and removing corporate officers and managerial employees , and (d) deciding whether to issue stock or bonds . Ch. 38: Corporations – Directors, Officers, and Shareholders - No. 1 West’s Business Law (9th ed.)
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DIRECTORS – PT. II Composition: A publicly-held corporation’s board of directors is composed of both inside directors (employees) and outside directors (non-employees). Compensation: Directors are entitled to be paid for their services, but do not share in the profits of the corporation unless they own shares of its stock. Voting: Directors exercise their oversight authority collectively and by majority vote. Agency: Directors are not authorized agents of the corporation simply by virtue of being directors. Personal Liability: Directors are generally not personally liable for the obligations of the corporation. Indemnification: Most states permit domestic corporations to indemnify directors against legal fees, costs, and judgments arising from corporate decisions. Ch. 38: Corporations – Directors, Officers, and Shareholders - No. 2 West’s Business Law (9th ed.)
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OFFICERS Officers: Persons hired by the board of directors to supervise the day-to-day operations of the corporation. Compensation: Officers are entitled to be paid for their services, but do not share in the profits of the corporation unless they own shares of its stock. Oversight: Officers are subject to oversight by the board of directors (and, indirectly, by the shareholders). Agency: Officers are authorized agents of the corporation – although the authority of a particular officer may be limited to certain types of transactions. Personal Liability: Officers are generally not personally liable for the obligations of the corporation. Ch. 38: Corporations – Directors, Officers, and Shareholders - No. 3 West’s Business Law (9th ed.)
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DUTY OF CARE Duty of Care: Directors and officers are expected to: (1) act in good faith in performing their duties, (2) exercise the care that an ordinarily prudent person would exercise in similar circumstances, and (3) act in the best interest of the corporation.
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