Bài giảng Business Law - Chapter 43: Management of Corporations

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin10History and Nature of CorporationsOrganization and Financial Structure of CorporationsManagement of CorporationsShareholders’ Rights and LiabilitiesSecurities RegulationLegal and Professional Responsibilities of Auditors, Consultants, and Securities ProfessionalsCorporationsPARTManagement of CorporationsPAETRHC43Managers should work for their peopleand not the reverse.Kenneth Blanchard Leadership and The One Minute Manager (2000)Learning ObjectivesRecognize limits on the objectives and powers of corporationsDescribe the roles of the board of directors and various committeesDiscuss recent developments in corporate governanceAdapt corporate governance rules to the close corporationShareholders own the corporation, but elect a board of directors to manage the firm and, typically, the board delegates most management duties to officers, who in turn hire managers and employeesModel Business Corporation Act (MBCA) states that a corporation has power to do anything that an individual may doCorporate PowersHistorically, an act of a corporation beyond its powers was a nullity since it was ultra vires (“beyond the powers”)MBCA and MNCA state that ultra vires may be asserted by three types of persons: (1) a shareholder seeking to enjoin a corporation from executing a proposed ultra vires action; (2) the corporation suing management for damages caused by exceeding corporate powers; and (3) the state’s attorney generalThe Ultra Vires DoctrineThe board of directors supervises the actions of its committees, the chairman, and officers to ensure the board’s policies are being carried out and the corporation is managed wiselySome corporate actions require board initiative and shareholder approvalAmending articles of incorporation, mergers, and dissolutionThe Board of DirectorsUnder straight voting, shareholder casts as many votes for each nominee as s/he has shares and top vote-getters are elected Class voting gives certain shareholder classes right to elect a specified number of directorsCumulative voting permits shareholders to multiply their shares by number of directors to be elected and cast the resulting total for one or more directorsElecting DirectorsOnce public ownership of shares exceeds 50 percent, management must solicit proxies from passive shareholders to have a quorum and achieve a valid shareholder voteA proxy is a person designated to vote for the shareholderWall Street rule: either support management or sell the sharesProxy SolicitationOfficers of a corporation include the president, one or more vice presidents, a secretary, and a treasurerOfficers are agents of the corporation, thus have express authority conferred on them by the bylaws or the board of directors and implied authority to do things reasonably necessary to accomplish dutiesOfficer Authority & Liability Directors and officers owe a fiduciary duty to the corporation, including duty to act within the scope of the powers of the corporationOfficers must within authority conferred by the articles of incorporation, bylaws, and board of directors Directors and officers are liable for losses to the corporation caused by their lack of care or diligenceDirector & Officer DutiesThe MBCA duty of care test requires a director or officer to make a reasonable investigation and honestly believe that the decision is in the corporation’s best interests Business judgment rule: absent bad faith, fraud, or breach of fiduciary duty, the judgment of directors and officers is conclusiveBusiness Judgment RuleWhen an outsider attempts to gain control of a publicly held corporation (the target), the outsider (raider) makes a tender offer for the shares of a corporation Tender offer is an offer to shareholders to buy their shares at a price above market priceCorporate management generally opposes tender offers using a variety of defensesAcquiring Control of a CorporationAs agents, directors and officers owe the corporation duties of loyalty, including the duty not to self-deal (a conflict of interest) If a director has a conflict of interest, a court may void the transaction with the corporation if it is unfair to the corporationIntrinsic fairness standard: a transaction is fair if reasonable persons in an arm’s-length bargain would have bound the corporationConflicting Interest TransactionShareholders isolated by another group of shareholders may complain of oppressionA freeze-out is oppression in which the corporation merges with a newly formed corporation under terms by which minority shareholders receive cash instead of shares of the new corporationGoing private is a freeze-out of shareholders of publicly owned corporationsMinority ShareholdersA person is always liable for his own torts, even if committed on behalf of a principalA director is liable for authorizing a tort or participating in its commissionA person is always liable for his own crimes, even if committed on behalf of a principal Corporations may also be liable for crimes as an entity or for employeesManagement LiabilityBecause officers and directors have a risk of liability, corporations often indemnify those who serve as a director or an officerIndemnify: to protect or insure; refers to practice by which corporations pay expenses of officers or directors named as defendants in litigationD & O insurance used as risk management toolIndemnification & InsuranceThought QuestionRoberto Goizueta, former CEO of Coca-Cola, said in 1992: Business now shares in much of the responsibility for our global quality of life. Do you agree or disagree with Goizueta? Support your opinion.