Chapter 40: Corporate Directors, Officers, and Shareholders – Flashcards
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Board of Directors
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Ultimate authority in every corporation. Have responsibility for all policymaking decisions necessary to the management of all corporate affairs and the carrying out routine corporate business
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Inside Director
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A director who is also an officer of the corporation
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Outside Director
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A director who does not hold a management position
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Quorum
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The minimum number of members of a body of officials or other group who must be present for business to be validly transacted
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Rights of Directors
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Right to participation Right of inspection Right to indemnification
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Right of Inspection
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Each director can access the corporation's books and records, facilities, and premises
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Right of Participation
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entitled to participate in all board of director's meetings and a right to be notified of these meetings
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Right to Indemnification
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Reimbursement for the legal costs, fees, and damages incurred
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Committees of the Board of Directors
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Executive committee, audit committee, nominating committee, compensation committee, litigation committee
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Directors and officers fiduciary duties
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Duty of care and duty of loyalty
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Duty of Care
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duty to make informed decisions, duty to exercise reasonable supervision, dissenting directors
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The Business Judgment Rule
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A corporate director or officer will not be liable to the corporation or to its shareholders for honest mistakes of judgment and bad business decisions
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The Business Judgment Rule Applies When
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(1) The director or officer took reasonable steps to become informed about the matter (2) He or she had a rational basis for the decision (3) There was no conflict of interest between the director's or the officer's personal interest and that of the corporation
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Duty of Loyalty
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Faithfulness to one's obligations and duties; subordinate personal interests to the welfare of the corporation
