Are You On Board? Promote Your Business Success With A Solid Board Of Directors.

With respect to a company, a director is an officer of the company who is the person

that is in charge of keeping control of the conduct and management of the affairs of the company. All the directors of the company are collectively known as the board of directors and it is usual for the board of directors to appoint one of its numbers to act as the chairman of the board.

In theory, the company is controlled by two bodies the board of directors and the shareholders. In practice, however, it is the type of company that controls the amount of power that is exercised by the board and in small private companies the directors and shareholders are normally the same entities, so there is hardly any power division. In the case of large publicly traded companies, the board of directors has the supreme role in most situations with individual responsibility and management usually delegated down to professional executive directors that are responsible for particular areas concerning different operations of the business.

In the case of large public companies, the board of directors tends to have the final say. It is generally difficult to overcome voting blocks because of the large number of shareholders involved and also due to the practice of institutional shareholders such as banks and pension funds that grant proxies to the board of directors to vote their shares at general meetings, thus influencing how the company shall work.

The board of directors is the result of incremental legal history and was, until the end of the nineteenth century, thought of as an agent of the company that acted under the control of the shareholders at a general meeting. In most business environments, directors are appointed as well as removed through a voting system undertaken by the shareholders of the company in a general meeting. Directors may resign or, in case of death, be replaced by another and may also be removed from office with the passing of a resolution of the remaining directors. In reality, it can often be quite difficult to remove a director through passage of a resolution. A good set of board of directors forms would most certainly contain a template for the voting in of a new board member.

The board of directors can exercise their powers at meetings and most bylaws allow for sufficient notice to be given to all directors of these meetings. A quorum should be present before conducting the business of the company. Due to the fact that directors exercise control as well as manage the affairs of the company and companies are run for the benefit of the shareholders, there are laws that impose strict duties on the directors with regard to the exercise of their duties. Such duties that are imposed on the directors are known as fiduciary duties and are quite like those that are imposed by law on other similar positions of trust, such as those levied on agents or trustees.

The duties of the members of the board of directors are pledged to the company and not to any other body. In addition, the members of the board of directors must act in an honest manner, do so in good faith, and as the directors should act in what they consider are the best interests of the company. Also, the directors have to exercise their powers for a proper purpose. Most often, an improper purpose will be easily evident and may include instances such as the directors acting in order to feather their own nests or act in a manner prejudicial to the best interests of the company and is more for personal profit or gain.

Directors must also not act without obtaining consent of the company, fettering their discretion in relation to the exercise of their powers and must not bind them to vote in a certain way at board meetings to be held in the future. As a fiduciary, the directors are not allowed to put themselves in a position where there is a conflict of interest between their own interests and the duties that they owe to the company. Also, directors are not permitted to use opportunities and information of the company for personal profit.

The members of the board of directors may also not compete directly with the company without a conflict of interests being the outcome. In the event of breach of duties the law allows for some remedies such as injunctions or declarations, damages or compensation, restoration of the property of the company, rescission of the relevant contract, account of profits, and also summary dismissal.

by: Wade Anderson

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