The Removing J.z. Jerkovski From the Position of CEO Essay

Issue

The legal effect of 7 out of 9 votes of directors in favor of removing J.Z. Jerkovski from the position of CEO where 9 out of the 12 directors were present and the certificate of incorporation state that for a vote to be effective it must be supported by at least two-thirds of the directors present if the quorum is met.

Rules

[A]majority of the entire Board shall constitute a quorum for the transaction of business… except that the certificate of incorporation… may fix the quorum at less than a majority of the entire board but not less than one-third thereof. NY CLS Bus-Corp §707.

Similarly, according to NY CLS Bus-Corp §709 (a) (2), the certificate of incorporation may contain provisions specifying the proportion of votes of directors that shall be necessary for the transaction of business (Schneeman, 2012).

Any officer elected or appointed by the board may be removed by the board with or without cause. An officer elected by the shareholders may be removed, with or without cause, only by vote of the shareholders, but this authority to act as an officer may be suspended by the board for cause. NY CLS Bus-Corp §716.

Analysis

The quorum was met as per the law because the majority of the directors were present. Similarly, the majority vote is as per the law and as per the requirement of the certificate of incorporation. However, it is not clear whether Jerkovski is acting after being appointed by directors or an annual general meeting has been convened where Jerkovski was elected as CEO. If no annual general meeting has been held, then the vote is legally enforceable. On the other hand, if Jerkovski was elected by shareholders, then the vote may not be legally enforceable.

Conclusion

The vote can only be enforceable if the CEO was appointed by the directors. If he was elected by shareholders, the directors must have a reason as to why they have to remove the CEO without waiting for the shareholders to vote.

Reference

Schneeman, A. (2012). The Law of Corporations and Other Business Organizations, 6^th ed. Stanford: Cengage Learning.