LAW 3102 Study Guide - Final Guide: Decision-Making, Proxy Voting, Capital Structure
Lec Summary 18
Role of Directors & Officers
Basics:
- Not all corporations have a board of directors
- Closed corp. can operate w/o board of directors (shareholders can run corp)
Who can be a BOD?
- Must be 18
- Certificate of incorporation/by-laws may include more reqs(ex: state residency
req)
Numbers? Many states demand at least 3 BOD
- Corporate by laws state the number of directors
- In NY single board is permitted
Terms: typically 1 year term
Removal- BOD can be removed by majority vote
- With or without case
- Court can also remove in proceeding brought by the corp or a shareholder who
owns min 10% due to
o Bad conduct
o If in corp’s best interest
Vacancy in BOD: can be filled by shareholders or affirmative vote of a majority of
remaining directors, even if less than a quorum of the board. Such a directors term will
expire @ next shareholder’s meeting
Compensation: now can either fix their own comp or in corp’s documentation
Actions: usually BOD can act only though a meeting or w/ unanimous written consent if
such is permitted w/o also having a meeting
Board can act only when the proper quorum is present. NO proxy voting! PHYSICALLY
PRESENT
Decision making: acts as a unit
Individual directors have no power or authority
Unlike officers, directors are not agents of the corp.
- hence why u can be in multiple positions
There must be a quorum for the board to act ( a majority) unless the corps documents
state differently, but cannot be less than 1/3
Publicly Held Corp
Privately Held Corp
Bigger company
Small family owned
BOD less involved in mgt
More involved in mgt
Powers exercised under the boards
authority
Exercised by board
In publicly held corporations:
If directors are also Officers / Employees / stakeholder -> they are Inside Directors.
Otherwise, they are Outside Directors (sometimes referred to as independent or non-
executive directors).
Outside Directors with no business with the corporation are Unaffiliated Directors.
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Not all corporations have a board of directors. Closed corp. can operate w/o board of directors (shareholders can run corp) Certificate of incorporation/by-laws may include more reqs(ex: state residency req) Corporate by laws state the number of directors. Removal- bod can be removed by majority vote. Court can also remove in proceeding brought by the corp or a shareholder who owns min 10% due to: bad conduct. Vacancy in bod: can be filled by shareholders or affirmative vote of a majority of remaining directors, even if less than a quorum of the board. Such a directors term will expire @ next shareholder"s meeting. Compensation: now can either fix their own comp or in corp"s documentation. Actions: usually bod can act only though a meeting or w/ unanimous written consent if such is permitted w/o also having a meeting. Board can act only when the proper quorum is present. Unlike officers, directors are not agents of the corp.
