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a)Term of Appointment--under most statutes, office is held until the next meeting, although on a classified board, dirs may serve staggered multi year terms.

b)Power to Bind Corporation Beyond Term--unless limited by the articles, the board has the power to make contracts biding the corp beyond the dirs’ term of office.

c)Removal of Director During Term--at common law, shs can remove a dir for cause (e.g., fraud, incompetence, dishonesty) unless an article or bylaw provision permits removal without cause. a dir being removed for cause is entitled to a hearing by shs before a vote to remove. a number of statutes permit removal without cause.

1)Removal by Board--board can NEVER remove a dir unless authorized by statute;

2)Removal by Court--there is a split authority as to whether a court can remove a dir for cause.

I)Statutes--some statutes permit courts to remove a dir for specified reasons. Usually, a petition for removal can be brought only by a certain percentage of shs or the attorney general.

3.FUNCTIONING OF BOARD

a)Meetings--absent a statute, dirs can act only at a duly convened meeting consisting of a quorum. In most jurisdictions, a meeting can be conducted by telephone or other means whereby participants can hear each other simultaneously. Most statutes also allow board action by unanimous written consent without a meeting.

 1)Notice--although formal notice is unnecessary for a regular meeting, special meetings require notice to every dir of date, time, and place. Usually, notice can be waived in writing before or after a meeting. Attendance waives notice unless the dir attends only to protest the meeting.

2)Quorum--a majority of the authorized number of dirs constitutes a quorum. Many statutes permit the articles or bylaws to require more than simple majority or less than that.

3)Voting--absent a contrary provision, an affirmative vote of a majority of those present, not a majority of those voting, is required for board action.

b)Effect of Noncompliance With Formalities--today, most courts hold that informal but unanimous approval of a transaction is effective, as is a matter receiving the explicit approval by a majority of dirs without a meeting, plus acquiescence by the remaining dirs.

c)Delegation of Authority--the board has the power to appoint committees of its own members to act for it either in particular matters or to handle day-to-day management between board meetings. Typically, these committees cannot amend the articles or bylaws, adopt or recommend major corporate changes (e.g., merger), recommend dissolution, 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; (i.e. 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.

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