B1: Corporate Governance － BoD and Officers

Question 1

Primary role of board of directors?

Answer 1

Safeguard the company’s assets and maximize shareholder return.

Question 2

Rights, duties, responsibilities and authorities of BoD?

Answer 2

A. Declaration of distributions/dividends (sole discretion)
B. Fiduciary duties
C. Indemnification - good faith
D. Limitation on director liability - bad faith (unethical)
E. Manage principal (shareholders) - agent (management) conflict - best interests of shareholders

Question 3

Fiduciary duties of BoD? - Act in the best interests of the corporation.

Answer 3

A. Right to rely - part of “due diligence” (informed decisions) - officers/employees & legal counsel/accountants
B. Liability for unlawful distributions/dividends
C. Duty of loyalty - best interests of the firm/disclosure of conflict of interest
D. Corporate opportunity doctrine - business opportunity is of interest to the corporation

Question 4

Rights, duties, responsibilities, and authorities of officers?

Answer 4

A. Selection and removal - selected by directors and can be removed with or without clause (even in contract)
B. Authority - actual & apparent
C. Fiduciary duties and indemnification
D. Also may serve as directors -good corporate governance means majority of the Board should be independent
E. Not required to be shareholders