?How are the directors of a corporation selected? What are their duties? How are the officers selected, and what are their duties? Describe the directors' and officers' fiduciary duties to the corporation and its shareholders.

Question

What will be an ideal response?

Answer 1

The articles of incorporation name the initial board of directors, which is appointed by the incorporators. Thereafter, the board of directors is elected by a majority vote of the shareholders. The board holds formal meetings and records the minutes (formal notes of what transpired at the meetings).Each director has one vote, and generally the majority rules. The directors' rights include the right to participate in board meetings and the right to inspect corporate books and records.The directors' responsibilities to the corporation and its shareholders include declaring and paying dividends (payments to shareholders representing their share of corporate profits), appointing and removing officers, and making significant policy decisions. The board of directors appoints the corporate officers, who manage the day-today operations of the firm. The officers are employees of the corporation and are subject to employment contracts.Officers are also agents of the corporation.Directors and officers have fiduciary duties to the corporation and its shareholder-owners,including the duty of loyalty and the duty to exercise reasonable care when conducting corporate business. The duty of loyalty is breached when an officer or director uses corporate funds or confidences for personal gain, as when an officer discloses company secrets(such as a proposed merger) to an outsider. The duty of care is breached when a director's or officer's negligence-failure to make informed and reasonable decisions-results in harmful consequences for the corporate entity.