Part 10- Corporations, Chapter 43: Management of Corporations, Doc 2 | Summary - Edubirdie

University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
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268

Pages:

2
Author:

bratrochanter

In corporate governance, several key aspects shape the effectiveness of the board of directors, particularly around the authority, composition, and voting dynamics, as well as officers’ roles and directors’ legal protections. Here are the main points from this section: 1. Board of Directors and Terms: o Directors typically serve one-year terms but may serve longer with staggered terms, where only part of the board is elected each year. This setup aids continuity but may limit minority shareholders' influence. 2. Proxy Solicitation: o In large corporations with public ownership, management often solicits proxies to meet quorum requirements and ensure director election, as most shareholders are passive and do not attend meetings. Proxies enable designated individuals, usually aligned with management, to vote on behalf of absentee shareholders, often reinforcing management’s control over board appointments. 3. Election and Removal of Directors: o Directors can generally be removed by shareholders with or without cause, though some corporations limit removal to cases of misconduct. Courts can also intervene to remove directors if fraud or harm to the corporation is evident, ensuring accountability. 4. Board Meetings and Voting: o Directors' meetings require a quorum, typically a majority of board members, for decisions to be valid. Votes of a majority of directors present suffice unless higher thresholds are set by corporate bylaws. Directors may also meet via telephone or video, facilitating decisionmaking without physical attendance. 5. Roles and Authority of Officers: o Officers, who are appointed by the board, serve as corporate agents with express, implied, or apparent authority depending on their position. Notably, a president’s power is limited to tasks delegated by the board or those necessary to carry out express duties. Ratification by the board can validate unauthorized actions, further empowering officers within bounds set by corporate governance structures. 6. Recent Governance Reforms: o In response to corporate scandals, governance reforms now emphasize board independence from management. NYSE and NASD rules require a majority of independent directors and separate executive sessions without the CEO. Additionally, nominating committees composed of outside directors seek to reduce management’s influence on board composition. These practices and reforms aim to ensure that the board operates in shareholders’ interests and maintains independence from corporate executives, ultimately enhancing transparency and accountability in corporate governance.

Related Documents

Part 10- Corporations, Chapter 43: Management of Corporations, Doc 2

Part 10- Corporations, Chapter 43: Management of Corporations, Doc 2 - Page 1

Part 10- Corporations, Chapter 43: Management of Corporations, Doc 2 - Page 2

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