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Corporate Directors, Officers, and Shareholders’ Duties Essay

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Updated: Apr 15th, 2022

Discussion

Corporate organizations function through their agents, such as; corporate directors, officers, and shareholders. These agents perform certain respective duties necessary to the corporate process. Thus, they play a central role facilitating business operations in Corporations; held either publicly or closely. This paper discusses the duties of these members of the corporation; corporate, directors, officers and shareholders.

Duties of Corporate Directors

Directors in publicly held Corporations perform fiduciary duties critical to the corporate process. The duties they perform are expected to be in the best interest of the Corporation. Common important duties they owe the Corporation include: duty of obedience, care, and loyalty. The duty to care prescribes levels of attention expected of a director in all issues related to the Corporation.

Corporate directors have duty to be informed about issues before making business decisions (Cross, 2011). This is possible through adherence to deliberate procedures and consultations with relevant publics, such as; committees, officers or employees, or other external experts in determining corporate decisions (Mallor, 2010).

Secondly, directors also owe the duty of obedience to Corporations they serve. They have a duty not to engage in actions that contravene Corporation’s chatter and legal procedures.

Corporate directors also have a duty of loyalty to corporations they serve. Under this duty, directors are required to solely work in the best interest of the organization as opposed to their own or associates interests.. Directors a responsibility to maintain confidential information deemed to be classified to the Organization. They have a duty to avoid conflicts of interest (Mallor, 2010).

Duties of Shareholders in corporations

Shareholders in Corporations owe fiduciary duties both to publicly held Corporations as well as closed Corporations. Certain characteristics differentiate closely held corporations from publicly held corporations. Shares in closely held Corporation’s are held by Mostly, shareholders invest their money in closely held companies in order to be felt in management (Cross, 2011).

In general, shareholders do not owe duties to each other in Corporations, that is; they owe no duty to the organization or its creditors with regard to their shareholding; other than the duty to pay the Corporation full amounts for shares issued subscribed.

Shareholders key duties in the corporate process can be organized into classes of honesty, good faith, candor and loyalty. For closely held Corporations, they owe a fiduciary to deal with utmost good faith, honesty, and openness with other shareholders (Mallor, 2010).

Duties of Officers in corporations

Corporate officers owe fiduciary duty of care to organizations and its owners. They required to discharge their mandates in line with these duty. Corporate officers make up senior management and have a duty to carry out day today management of Corporations.

The fiduciary duty exhibited by Corporate officers includes; honesty, loyalty and utmost good faith. They also have a duty to avoid any conflict of interest between their personal interests and Corporation’s interests (Cross, 2011).

Conclusion

In sum, corporate organizations act through their directors. Directors are responsible for overseeing operation of the corporation’s business. Boards of directors in Corporations range from one to several directors. Statutory provisions may provide for a minimum number of directors, for instance; some states demand the board of directors to consist of at least three directors, unless the shareholders are fewer than three.

The corporate directors in smaller corporations may also be employees, officers and shareholders of the corporation. The board of directors of larger organizations will include percentage of directors from outside; these directors are neither employees nor shareholders of the corporation.

Reference List

Cross, F., & Miller R. (2011). The Legal Environment of Business. New York: CENGAGE Learning.

Mallor, P., Barnes, J., Bowers, T., & Langvardt, W. (2010). Business Law. New York: McGraw Hill.

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IvyPanda. "Corporate Directors, Officers, and Shareholders' Duties." April 15, 2022. https://ivypanda.com/essays/corporate-process-essay/.

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IvyPanda. 2022. "Corporate Directors, Officers, and Shareholders' Duties." April 15, 2022. https://ivypanda.com/essays/corporate-process-essay/.

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IvyPanda. (2022) 'Corporate Directors, Officers, and Shareholders' Duties'. 15 April.

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