Compensation of Directors/Trustees (Section 29, Revised Corporation Code)
Summary
TLDRAttorney Marie Chris Batan Lasko's video on the MBL Classroom YouTube channel clarifies the compensation rights of corporate directors and trustees. Generally, they are not entitled to compensation unless specified in bylaws, and can only receive per diems for meeting attendance as per Section 29 of the Revised Corporation Code. Compensation, if any, must be approved by shareholders or members, with a cap set at 10% of the corporation's net income before tax from the previous year to prevent excessive payouts. The video educates viewers on the legal framework guiding director and trustee compensation, ensuring fairness and protecting the corporation's interests.
Takeaways
- 📚 The video is an educational resource by Attorney Marie Chris Batan Lasko, aiming to simplify the law.
- 🏢 The main topic discussed is the compensation of directors or trustees in a corporation.
- 📖 According to Section 29 of the Revised Corporation Code, directors or trustees are generally not entitled to compensation unless specified in the bylaws.
- 💼 Directors or trustees are typically not compensated because they are considered owners of the corporation, holding at least one share of stock.
- 💼 As owners, directors are expected to act in the best interest of the corporation, which is also in their benefit as shareholders.
- 💼 The concept of 'per diem' is introduced as a reasonable allowance for attendance in meetings, which is allowed under Section 29.
- 🚫 If the bylaws do not provide for compensation, directors or trustees should not receive any, except for per diems.
- 🔍 The determination of compensation, if provided in the bylaws, should not be made by the directors or trustees themselves to avoid conflict of interest.
- 🗳️ Stockholders or members, representing at least a majority, have the power to grant and approve compensation for directors or trustees.
- 💰 There is a legal limit on the total yearly compensation for directors or trustees, which should not exceed 10% of the corporation's net income before income tax from the preceding year.
- 📋 Corporations with public interest must submit an annual report detailing the total compensation of each director or trustee to their shareholders and the commission.
Q & A
What is the general rule regarding compensation for directors or trustees according to the revised corporation code?
-According to Section 29 of the revised corporation code, directors or trustees are generally not entitled to compensation, unless the bylaws of the corporation provide for it.
What is the meaning of 'per diem' in the context of director or trustee compensation?
-A 'per diem' is a reasonable allowance given to each director or trustee for their attendance at a meeting.
Why are directors or trustees typically not entitled to compensation as a general rule?
-Directors or trustees are usually not entitled to compensation because they are considered owners of the corporation, holding at least one share, and are expected to act in the best interest of the corporation, which also benefits them as shareholders.
Can the board of directors or trustees determine their own compensation if it is provided in the bylaws?
-No, the board of directors or trustees should not determine their own compensation to avoid conflict of interest and the potential for excessive self-awarding.
Who is responsible for determining the compensation of directors or trustees if it is provided in the bylaws?
-The stockholders representing at least a majority of the outstanding capital stock or majority of the members can grant directors or trustees compensation and approve the amount at a regular or special meeting.
What is the maximum total yearly compensation that can be given to directors or trustees?
-The total yearly compensation for directors or trustees must not exceed 10% of the net income before income tax of the corporation during the preceding year.
Why is there a limit set on the compensation for directors or trustees?
-The limit is set to curb the practice of giving excessive bonuses to directors or trustees, thereby protecting the corporation and its stockholders or members.
Are directors or trustees allowed to participate in the determination of their own per diems or compensation?
-No, directors or trustees are not allowed to participate in the determination of their own per diems or compensation to prevent bias and ensure fairness.
What is required for corporations vested with public interest regarding the compensation of directors or trustees?
-Corporations vested with public interest must submit an annual report of the total compensation of each of their directors or trustees to their shareholders and the commission.
What is the purpose of discussing the compensation of directors or trustees in the video?
-The purpose is to simplify and clarify the legal provisions regarding the entitlement and limitations of compensation for directors or trustees, as outlined in Section 29 of the revised corporation code.
How can viewers stay updated with new video uploads on the MBL Classroom YouTube channel?
-Viewers can click like, subscribe, and enable the notification bell to be notified of new video uploads on the MBL Classroom YouTube channel.
Outlines
📚 Introduction to Director Compensation in Corporations
Attorney Marie Chris Batan Lasko introduces her virtual classroom on YouTube, where she aims to simplify the law in under 10 minutes per video. This specific video discusses the entitlement of directors or trustees to compensation in corporations. According to Section 29 of the Revised Corporation Code, directors or trustees are generally not entitled to compensation unless provided by the corporation's bylaws. However, they are entitled to per diems, which are reasonable allowances for attendance at meetings. The rationale behind the general lack of compensation is that directors, as shareholders, are expected to act in the best interest of the corporation, which also benefits them as owners. If compensation is to be provided, it must be determined by the stockholders or members during a meeting, not by the directors or trustees themselves to avoid conflict of interest.
🏢 Determining Director Compensation and Its Limits
The video continues to delve into the specifics of determining director or trustee compensation, if allowed by the bylaws. It clarifies that the compensation must be approved by stockholders representing a majority of the outstanding capital stock or by the majority of the members for non-stock corporations. The total yearly compensation for directors should not exceed 10% of the corporation's net income before income tax from the preceding year. This limit is set to prevent excessive bonuses and protect the corporation and its stakeholders. Public interest corporations are required to submit an annual report detailing the total compensation of each director or trustee to their shareholders and the commission. The video concludes by encouraging viewers to like, subscribe, and enable notifications for new content, and the host looks forward to their next meeting in the MBL Classroom.
Mindmap
Keywords
💡Board of Directors
💡Trustees
💡Compensation
💡Per Diem
💡Bylaws
💡Stockholders
💡Majority Vote
💡Net Income
💡Conflict of Interest
💡Public Interest Corporations
💡Fiduciary Duty
Highlights
Introduction to the YouTube channel 'MBL Classroom' by Attorney Marie Chris Batan Lasko, focusing on simplifying the law.
The video's topic: whether the board of directors or trustees is entitled to compensation for their roles.
Section 29 of the Revised Corporation Code states that directors or trustees are generally not entitled to compensation.
Directors or trustees are entitled to per diems, which are reasonable allowances for attendance in meetings.
The rationale behind the general rule of no compensation is that directors, as shareholders, are already receiving benefits from the corporation.
Compensation can be provided in the bylaws, but it should not be self-determined by the directors or trustees to avoid conflict of interest.
Stockholders or members representing a majority can grant and approve compensation for directors or trustees.
The total yearly compensation for directors should not exceed 10% of the corporation's net income before income tax of the preceding year.
Directors or trustees should not participate in determining their own per diems or compensation.
Public interest corporations must submit an annual report of the total compensation of each director or trustee to shareholders and the commission.
The limit on compensation is set to prevent excessive bonuses and protect the corporation and its stockholders.
The video concludes with an invitation to like, subscribe, and enable notifications for new uploads.
The importance of understanding the legal framework for director and trustee compensation in corporations.
The role of bylaws in determining director and trustee compensation and the potential for conflict of interest.
The process by which stockholders or members can approve compensation for directors or trustees.
The legal limit on director and trustee compensation and its implications for corporate governance.
The requirement for public interest corporations to disclose compensation details to maintain transparency.
Transcripts
foreign
[Music]
hi i am attorney marie chris batan lasko
this is my virtual classroom welcome to
my youtube channel
in this channel i shall aim to simplify
the law i will discuss concepts and
principles of law in under 10 minutes
hello again everyone welcome to mbl
classroom so what is this video going to
be about this is going to be about still
the board of directors or trustees
and if they are entitled to any
compensation as being directors or
trustees
to answer this question you have to go
over
section 29 of your revised corporation
code section 29 tells you that as a
general rule your directors or trustees
are actually not entitled to
compensation
this means that if the bylaws of the
corporation do not provide for any
compensation for your directors or for
your trustees then they're not supposed
to be getting any compensation your
section 29 however tells you that they
are entitled to per diems
what is a per diem a per diem is
actually a reasonable allowance for each
director or trustee
in their attendance or rather for their
attendance in a meeting so that is only
what they're entitled to under section
29 again
if your bylaws or the bylaws of the
corporation do not provide for a
provision where the director or the
trustee is entitled to compensation now
you might ask why are not why are they
not rather entitled to compensation as a
general rule
the reason behind the law
that they are generally not entitled to
compensation is because as directors
they are supposedly owners of the
corporation being a holder of at least
one share of stock in a corporation and
as such
they are supposed to be getting benefits
from such ownership and that they are
supposed to act for and in behalf of the
corporation as being part of the board
of directors always looking after for
the best interest of the corporation
because they themselves are also owners
of a corporation by owning at least a
share of stock in a corporation
presupposes that they are rendering
their services
gratuitously
in exchange for
perhaps an increase
in the
earnings of the corporation that would
that would also benefit them
as shareholders of the corporation
earlier i mentioned that your section 29
says that they may actually be given
compensation if it is so provided in the
by-laws
now
if it is provided for in the by-laws
who will determine how much compensation
should the director or a trustee
uh will get
is it going to be the directors the
board of directors or the board of
trustees who will determine their
compensation
the answer is no
it should not be them who will determine
their compensation because clearly there
will now be conflict of interest there
will of course be the natural tendency
that they will be giving themselves more
than what they would deserve
and so who shall fix the compensation if
such is provided in the bylaws let's
read section 29 it says in the absence
of any provision in the bylaws fixing
their compensation the directors or
trustees shall not receive any
compensation in their capacity as such
except for reasonable per diems provided
however that the stockholders
representing at least a majority of the
outstanding capital stock or majority of
the members may grant directors or
trustees with compensation and approve
the amount thereof at a regular or
special meeting
in no case shall the total yearly
compensation of directors exceed 10
of the net income before income tax of
the corporation during the preceding
year
directors or trustees shall not
participate in the determination of
their own per diems or compensation
corporations vested with public interest
shall submit to their shareholders and
the commission an annual report of the
total compensation of each of their
directors or trustees section 29 then
tells you that it should be the
stockholders or the members who will
determine the compensation and they will
have to vote on it and what is the
required vote the required vote is at
least a majority of the outstanding
capital stock for stock corporations and
at least a majority of your members if a
non-stock corporation in section 29 it
also mentions of a limit to the
compensation being given to your
directors or trustees
what is the limit the limit is that the
total compensation given to the
directors or trustees must not exceed
10 percent 10 percent of what it must
not exceed 10
of the net income before income tax of
the corporation during the preceding
taxable year
why is there a limit a limit is being
set
to curb the practice of giving excessive
bonuses to
or trustees this is in effect also
protecting the corporation and also the
stockholders or the other members of a
corporation
so that's it for this video on the
compensation of your directors or
trustees again i hope you have learned
something from this short video and i
will see you in the next
so if you find this video helpful please
click like subscribe and that
notification bell so that you will be
notified of new video uploads
thank you for watching see you next time
in mbl classroom
[Music]
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