Pg 25 Flashcards
What is involved in the director’s right to inspect?
Directors that are acting in good faith to fulfil their fiduciary duty have a near absolute right of access to corporate and books and records.
What would have to be involved in order for a director’s right of access to inspect corporate records to be denied?
He clearly improper purpose
What are some examples of improper purposes that a director could have that would make it so that he couldn’t be given a right to inspect corporate records?
– personal gain
– self dealing
- director is an employee of the competitor
– wanting to blackmail someone
What is the job of a director?
- to set policies for the corporation
- supervise the work of officers
- do everything that is not reserved to the shareholders
Essentially they control the corporation
How often do directors meet?
Usually monthly
What are all of the things that a director is responsible for?
- appoint, supervise, and remove corporate officers
– determine corporate policy
– oversee officers
– determine officer compensation
– give advice and assistance to the officers
– monitor the company’s progress
– deal with bankruptcy filings or decide to sue for corporate injuries
What are the things that directors need shareholder approval for?
Anything that creates a fundamental change in the corporation’s business affairs:
– changing the articles of incorporation
– dissolving the corporation
– consolidation or merger
– sale or lease of all of the corporate assets
– creating a new kind of stock or adding additional stock
What is the rule for the number of directors that are needed?
Different from state to state. Some require a minimum, some have an upper limit, but the modern trend is just one. The usual range is 3 to 21 with seven being the average
What is the standard of care that applies to directors?
That of a reasonably prudent person in a similar position.
Who does the duty of care apply to and who does the duty of loyalty apply to within a corporation?
– duty of care: only directors
– duty of loyalty: directors and officers
What is a committee for with regard to directors?
It is used to deal with issues more in depth. I.e.: executive committees meet between meetings with just a few inside directors.
- compensation committee: can approve or recommend salary agreements for senior management
- audit committee: can deal with independent auditors
- nominating committee: can recommend candidates for election to the board
How do directors act together as a board?
Official decisions get made at official meetings through everyone acting together collectively
How are directors considered to be fiduciaries?
They have a duty to put the interests and advancement of the corporation before their own personal interests.
Where do you find the requirements to become a director?
Usually in the articles of incorporation or the bylaws.
What is the requirement for a board meeting?
- there must be a quorum
- all directors must have been properly notified of the meeting a reasonable time beforehand, and if they aren’t, then anything that happens at the meeting is invalid
- extraordinary business must be specified in the notice
