23: Corporate Powers and Management
- Page ID
- 11166
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)After reading this chapter, you should understand the following:
- The powers of a corporation to act
- The rights of shareholders
- The duties, powers, and liability of officers and directors
Power within a corporation is present in many areas. The corporation itself has powers, although with limitations. There is a division of power between shareholders, directors, and officers. Given this division of power, certain duties are owed amongst the parties. We focus this chapter upon these powers and upon the duties owed by shareholders, directors, and officers.
- 23.1: Powers of a Corporation
- This page discusses corporate powers, distinguishing between express and implied powers, and introduces the ultra vires doctrine, which restricts corporate actions. Express powers are granted by law, while implied powers are necessary for fulfilling corporate purposes. Engaging in ultra vires acts can result in legal challenges and liability for corporations. It underscores the necessity for compliance with laws and regulations to avoid legal repercussions.
- 23.2: Rights of Shareholders
- This page discusses corporate management, focusing on the separation of ownership and control in publicly traded companies. It highlights shareholder rights, including voting for directors and the importance of annual meetings. Mechanisms like cumulative voting, proxies, and voting trusts are detailed for consolidating power. Shareholders can inspect records, have preemptive rights against dilution, and initiate derivative actions for misconduct.
- 23.3: Duties and Powers of Directors and Officers
- This page details the roles and responsibilities of corporate directors under the Revised Model Business Corporation Act (RMBCA). Directors act as fiduciaries to safeguard shareholder investments and manage operations, with the option to delegate tasks. They are elected annually, subject to general qualifications, and can be removed without cause. While meetings are mandatory, their frequency can differ.
- 23.4: Liability of Directors and Officers
- This page discusses the fiduciary duties of corporate directors and officers, specifically the duty of loyalty and duty of care, which require prioritizing the corporation's interests and making informed decisions. Court cases and statutes like Sarbanes-Oxley and constituency statutes shape these duties. The business judgment rule offers legal protection for directors acting in good faith.
- 23.5: Cases
- This page covers three legal cases: "Cross v. The Midtown Club, Inc." discusses a plaintiff's claim against a nonstock corporation for excluding female members, which the court deemed unjustified. The second addresses the business judgment rule concerning directors' liability, emphasizing the distinction between bad faith and gross negligence under Delaware law.
- 23.6: Summary and Exercises
- This page discusses how a corporation operates through express and implied powers that can be modified via its articles of incorporation. Shareholders primarily elect directors who hold fiduciary responsibilities but can delegate duties. Shareholders have rights to access records and file derivative suits for fiduciary breaches. The business judgment rule protects directors from liability for decisions made in good faith.