Powers and Duties of Corporate Directors and Officers | Corporate Directors vs. Corporate Directors

Summary

In this video, Kevin O'Flaherty from O'Flaherty Law explains the roles and responsibilities of corporate directors and officers. He outlines the distinction between the two, with directors handling big-picture strategies and officers managing day-to-day operations. Key roles like CEO, CFO, and COO are discussed, alongside their duties. He also covers fiduciary responsibilities, emphasizing the 'business judgment rule,' which protects directors and officers from personal liability if acting in good faith. The hierarchy within corporations and legal obligations toward shareholders are explained. For more, viewers are encouraged to visit the law firm or subscribe for updates.

Takeaways

• 📊 Corporate directors are responsible for big-picture strategies and company policies.
• 👥 Officers are elected by directors to implement the strategies set by the board.
• 💼 Directors handle major decisions, while officers manage daily operations (e.g., CEO, CFO, COO).
• 📑 A CEO (Chief Executive Officer) oversees the overall management and vision of the company.
• 📈 A COO (Chief Operating Officer) manages the company's operational workflow and logistics.
• 💰 A CFO (Chief Financial Officer) is responsible for managing the company's financial accounts and finances.
• 📝 The secretary is responsible for record-keeping, meeting minutes, and other documentation during corporate meetings.
• ⚖️ Directors and officers must act with fiduciary responsibility, loyalty, honesty, and good faith towards the corporation.
• ❗ The business judgment rule protects directors and officers from personal liability if they act in good faith and with reasonable business judgment, even if their decisions don't pay off.
• 🏛 Shareholders elect the board of directors, who in turn elect the officers, maintaining a hierarchy of corporate control.

Q & A

What is the primary difference between corporate directors and officers?

Directors are responsible for big-picture strategies and policies, while officers implement those strategies in the day-to-day operations of the corporation.

Who elects the board of directors in a corporation?

Shareholders elect the board of directors, who are responsible for overseeing the corporation's overall strategy.

Can the same person be both a shareholder, director, and officer in a corporation?

Yes, in small corporations, the same individuals can serve as shareholders, directors, and officers.

What roles are typically considered corporate officers?

Common officer roles include President, Vice President, Secretary, Treasurer, as well as C-suite positions like CEO (Chief Executive Officer), COO (Chief Operating Officer), and CFO (Chief Financial Officer).

What is the duty of loyalty that corporate directors and officers have?

Directors and officers have a duty of loyalty to act in the best interest of the corporation, avoiding actions that benefit themselves or any other party at the corporation's expense.

What is the business judgment rule?

The business judgment rule protects directors and officers from personal liability as long as they act in good faith, exercising their best business judgment, even if their decisions do not lead to the expected outcomes.

What happens if a corporate officer or director breaches their fiduciary duty?

If a director or officer breaches their fiduciary duty, they may be held personally liable for any harm caused to the corporation or its shareholders.

Who holds the ultimate control in a corporation?

Shareholders hold the ultimate control as they elect the board of directors, who are responsible for setting company policies and strategies.

What responsibilities does the corporate secretary have?

The corporate secretary is responsible for taking meeting minutes during board and shareholder meetings, maintaining records, and other note-taking duties.

What is the role of the CFO in a corporation?

The CFO, or Chief Financial Officer, manages the corporation's finances, including handling accounts, financial planning, and oversight of the company's financial health.