Director's voting & committees

Question 1

General

Answer 1

Board of directors manages and directs the manegment of the corp business and affairs

Meaning - appointing officers who run the business on a day to day basis, overseeing the officers, and making the high level corp decisions

Question 2

Director Basics

Answer 2

Number - board can have as few as 1 directors, but ohio assumes 3 if articles are silent

Qualifications - any natural person, even a celbrity or retired politician can be a director (but must be 18)

Term - ordinarily a 1 year term; elected by either straight or cumulative voting

Exception - “Classified” or “Staggered” Board - each class serves for several years with the term of one class ending each year

Resignation - directors may resign at any time by delivering notice to the corp or to the board or chair of the board

Vacancy - director vacany may be filled by majority vote of remaining directors (even if not enough for quorum) or by vote of shareholders

Question 3

Removal and Replacement

Answer 3

Removal - unless bylaws say otherwise, shareholders can remove directors with or without cause before the end of director’s term

Exceptions -

1. directors on a staggered or classified board can only be removed for cause
2. directors elected by a particular class of stock can only be removed by that class
3. directors elected by cumulative voting cannot be removed if votes sufficient to elect the director are cast against removal

Replacement - either the shareholders or the directors can replace a director if there are vacancy or the size of the board has been increased

Question 4

Board Meetings

Answer 4

Notice Requirements - notice of the place and time of each meeting of the directors must be given to each director at least 2 days before the meeting

Waiver - if director signs waiver, the waives notice; also waives if appears at meeting

Presence - need not be physically present at meeting, can take place via internet and remotely

Question 5

Voting Requirements - Quorum

Answer 5

Requirement - quorum of directors (physically or electronically) must be present for any directiorial decisions to be valid

Number - unless bylaw state otherwise, Ohio sets quorum at majority of all directors in office (quorum lost if someone steps out)

Proxy - directors may NOT be present by proxy

Votes Required - unless articles set a higher number, a majority of the directors who cast a vote on issue is required for approval of an action

Voting Agreement - agreement between directors as to how to vote is generally unenforceable and must exercise her independent judgment

Question 6

Director Dissent

Answer 6

If director wishes to avoid potentional liability for a board descision from which he dissents, he must:

1. promptly file a written dissent during the meeting or within a reasonable time after the meeting
2. ensure her dissent is noted in the meeting’s minutes or not vote in favor of the action and
3. deliver rwritten notice of her dissent to the presiding officer

Question 7

Committees

Answer 7

Rule - directors can delegate many of ther responsibilities to committee if a majority of all directors vote to establisht he committee and to appoint a director to the committee.

Limitations - committee cannot make major decisions on behalf of the board such as: declaring distributions, recommending actions to shareholders that require shareholder approval, creating or fulfilling board vacancies, and adopting repealing bylaws

Sarbanes-Oxley Act - publically held firms must have an audit committee to supervise outside auditors

Firms listed on stock exchange must have a nominating comittee and a compensation committee and their directors must be independent