Compensation of Directors/Trustees (Section 29, Revised Corporation Code)

MBL Classroom

17 Apr 202207:29

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

00:00

📚 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.

05:00

🏢 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

The 'Board of Directors' is a group of individuals elected by the shareholders of a corporation to make decisions on their behalf. In the video, it is discussed that directors are generally not entitled to compensation, except for per diems for attending meetings, which is a core concept in understanding corporate governance and the fiduciary duties of directors.

💡Trustees

Trustees are individuals who hold property in trust for the benefit of others. In the context of the video, they are similar to directors in that they are not typically entitled to compensation but may receive per diems for attending meetings, highlighting the principle of fiduciary responsibility.

💡Compensation

Compensation refers to the payment or reward given to directors or trustees for their services. The video emphasizes that directors and trustees are generally not entitled to compensation, except as provided in the bylaws, which is a key point in understanding the legal framework for corporate remuneration.

💡Per Diem

A 'Per Diem' is a fixed daily allowance provided to directors or trustees for attending meetings. The video explains that this is the only form of compensation directors and trustees are generally entitled to under Section 29 of the revised corporation code, illustrating the limited scope of remuneration for their services.

💡Bylaws

Bylaws are the rules and regulations established by an organization to govern its activities. In the video, the bylaws of a corporation are mentioned as the potential source of provisions for director or trustee compensation, indicating their importance in determining the remuneration structure within a corporation.

💡Stockholders

Stockholders, or shareholders, are the owners of a corporation who hold shares. The video mentions that stockholders have the power to grant directors or trustees compensation and approve the amount at regular or special meetings, highlighting their role in corporate governance.

💡Majority Vote

A 'Majority Vote' refers to a decision-making process where more than half of the votes are required for a resolution to pass. The video explains that a majority of the outstanding capital stock or members is needed to approve director or trustee compensation, showing the democratic process in corporate decision-making.

💡Net Income

Net Income is the profit a company makes after all expenses have been deducted from its total revenue. The video specifies that the total yearly compensation for directors should not exceed 10% of the net income before income tax of the corporation during the preceding year, indicating a legal limit on executive pay.

💡Conflict of Interest

A 'Conflict of Interest' arises when a person's personal interests interfere with their professional duties. The video points out that directors or trustees should not determine their own compensation to avoid such conflicts, which is crucial for maintaining ethical standards in corporate leadership.

💡Public Interest Corporations

Public Interest Corporations are organizations that provide services or products of significant importance to the public. The video mentions that these corporations must submit an annual report of the total compensation of each director or trustee to their shareholders and the commission, emphasizing transparency and accountability in such entities.

💡Fiduciary Duty

Fiduciary Duty is the legal obligation of a person in a position of trust to act in the best interest of another party. The video implies that directors, as part-owners of the corporation, are expected to act in the best interest of the corporation and its shareholders, which is a fundamental principle of corporate law.

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.