n, declare a dividend, or authorize issuance of stock unless permitted by the articles or bylaws. Note that while the board may delegate operation of the business to an officer or management company, the ultimate control must be retained by the board.
d) Provisional Directors - some statutes allow them to be appointed by court if the board is deadlocked and corporate business is endangered. a provisional dir serves until the deadlock is broken or until removed by a court order or by majority of shs.
e) Voting Agreements - an agreement in advance among dirs as to how they will vote is void as contrary to public policy. There are certain exceptions for statutory close corps.
4.COMPENSATION--dirs are NOT entitled to compensation unless they render extraordinary services or such compensation is otherwise provided for. Officers are entitled to reasonable compensation for services.
5.DIRECTORS 'RIGHTS, DUTIES, AND LIABILITIES
a) Right to Inspect Corporate Records - if done in good faith for purposes germane to his position as dir, this right is absolute.
b) Duty of Care - dirs must exercise the care of an ordinarily prudent and diligent person in a like position, under similar circumstances. There is no liability (absent a conflict of interest, bad faith, illegality, or gross negligence) for errors of judgment (business judgment rule - the rebuttable presumption that action was taken on an informed basis, in good faith and exercising reasonable care), but the dir must have been reasonably diligent before the rule can be invoked (Shlensky)
1) The duty of care requires:
I) Education - a dir should acquire at least a rudimentary understanding of the business of the corporation;
ii) Information - a dir is under a continuing obligation to keep informed about the activities of the corp;
iii) Participation - dirs must "generally monitor" corporate affairs, but need NOT involve themselves in the day-to-day operations; (ie they should attend board of dirs meetings with reasonable regularity).
iiii) Inquiry - a dir has a duty to inquire when circumstances would alert a reasonable person for the need of inquiry.
iiiii) Action - where wrongdoing is revealed, a dir should object, correct, or resign. Object to the course of conduct, steer toward correction, and resign if it isn't corrected.
2) Extent of liability - dirs are personally liable for corporate losses directly resulting from their breach of duty or negligence in falling to discover wrongdoing. a director may seek to avoid being held personally liable for acts of the board by recording his dissent.
I) Many statutes permit the articles to abolish or limit dir's liability for breach of the duty of care absent bad faith, intentional misconduct, or knowing violation of law.
3) Defenses to liability - these include good faith reliance on management or expert&...
