Chapter 48 Corporate Management

Basic structure of management
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Terms in this set (11)
Basic structure of management
shareholders -> directors -> officers
Shareholders
1. owners
2. vote to elect directors (sometimes officers)
3. vote to authorize some types of extraordinary actions
*voting is not mandatory, don't get in trouble if you don't
Shareholder management duties
Ordinary matters: elect directors, approve bylaws, approve shareholder resolutions
Extraordinary matters: file bankruptcy, sell majority divisions, merger, consolidation, non-regular major decisions
Quorum
minimum number of shareholders necessary to conduct a valid meeting- typically 75% required present in order for [vote] business to take place
Directors
managers in their own way, only not hands on
1. the board has oversight and policy-level authority
2. fiduciaries
3. hire and supervise officers
Qualifications of directors
Establish by statute, articles of incorporation, or bylaws - things like age, sound of mind, etc.
Business Judgement Rule
a rule that protects directors from personal liability from their negligent acts or omissions in exercising corporate governance
-you get in trouble as a director for 1. malfeasance (misconduct) 2. nonfeasance (not showing up for meetings)
-major area in corporate governance bc movement about loosening rules to make lawsuits easier on directors
Business Judgement Rule EX
-Ford Edsel: people thought it looked like a face sucking a lemon. Controversial in view of public, bad quality control
-Coke in the 80s: changed formula bc people liked Pepsi better = bad plan because they had such a strong brand. Public pushback was so bad & shareholders were mad -> shareholder meeting to discuss issue
-Disney suit, golden parachute, huge shareholder derivative suit
Officers
1. responsible for day-to-day management of the corp
2. fiduciaries and agents
3. report to Board of Directors
Responsible Officer Doctrine
Corporate officers can be held criminally liable under some federal and state statutes. Responsibility sometimes attaches when the "responsible officer" fails to follow appropriate regulations
-being held criminally liable vicariously MEANS you're being held criminally liable for someone else's actions
-EX. 3 ppl: forklift driver, general manager who gave orders, and VP for environmental issues. GM gives order to driver to dump waste on road. Driver and GM are guilty, plus office supervisor guilty for negligence
Liability to third personsFault of one venturer will be imputed to the others- directors and officers generally not liable -Exceptions: personal tortious actions (always responsible for things you do yourself), fraud, securities act of 1933