In this episode, we explain the powers and duties of corporate directors and officers, and compare the role of corporate directors to corporate officers. We answer the following questions:
In this article...

In this article, we explain the powers and duties of corporate directors and officers, and compare the role of corporate directors to corporate officers.  We answer the following questions:

In this article, we explain the powers and duties of corporate directors and officers, and compare the role of corporate directors to corporate officers.  We answer the following questions:

  • What do Corporate Officers handle?
  • What are the different kinds of Corporate Officers?
  • What do Corporate Directors handle?
  • What is a Board of Directors?
  • What is the difference between Officers and Directors?
  • What can lead to the expulsion of a Corporate Director?

A majority of corporations’ structures consist of three main positions: directors, officers, and shareholders. In smaller businesses, one person can serve as the business’s only officer, director, and shareholder. Directors and officers owe fiduciary duties to Corporate Stakeholders, as well as the business entity itself. Essentially, fiduciary duties ensure that officers and directors apply their best business judgment, act in good faith, and promote the best interests of the corporation.

What is The Difference Between Corporate Officers and Corporate Directors?

Corporate Officers and Corporate Directors act similarly in a few ways, mainly because both roles must act in good faith, entirely in the best interests of the corporation. Officers and directors owe fiduciary duties of loyalty, honesty, good faith, and fair dealing to the corporation; individuals will not be liable for any action taken, or any failure to take any action, as long as they performed those duties to the best of their ability (To learn more about this, check out our article: The Business Judgment Rule Explained. While directors and offers are held to the same standards, they play very different roles in the corporation.

The Board of Directors is responsible for vital business and policy decisions, and the Corporate Officers are responsible for executing the actual implementation of those strategic decisions. Here are the different types of Corporate Officers:

Duties of Corporate Directors: What Do Corporate Directors Handle?

Corporate Directors oversee the affairs of the corporation in order to protect the interests of the shareholders. Corporate Directors act as a group, called a Board of Directors. Formalizing a Board of Directors is one of the first tasks when starting a corporation. The Board of Directors is the corporation’s governing body, as it manages the corporation’s business and affairs and has the authority to exercise all of the corporation’s powers.

Issues and decisions that fall to the Board’s purview include the hiring and firing of senior executives, setting company goals, dividend policies, managing resources, options policies, and executive compensation. Every public company must have a Board of Directors. Corporate Shareholders elect who they want to be on the Board of Directors at an annual meeting.

The Board of Directors should be an equal representation of both management and shareholder interests, consisting of both internal and external members. Honestly, anyone can act as a Corporate Director, but it’s up to the corporation to outline reasonable qualifications an individual must meet in order to serve on the Board of Directors. In the United States, at least 50% of the Corporate Directors must be “independent” from the organization, meaning they are not associated with or employed by the company. Independent directors are more likely to act in the shareholders’ interests, because they are not subject to management pressures.

A Corporate Director’s duties and responsibilities include but are not limited to:

  • Acting on behalf of the corporation "in good faith"
  • Staying informed on corporate developments to make educated decisions
  • Acting with loyalty to the corporation and its shareholders
  • Attending and participating in regular meetings
  • Approving corporate activities and transactions
  • Amending the corporation's bylaws or articles of incorporation
Corporate Officers

Duties of Corporate Officers: What Do Corporate Officers Handle?

The Board of Directors appoints Corporate Officers. Corporate Officers handle day-to-day operations of the business, usually consisting of a president, one or more vice-presidents, the secretary, and a treasurer. Officer duties may vary by position, but the main responsibility of a Corporate Officer is to manage the ongoing business.

  • Chief Executive Officer (CEO): oftentimes referred to as the President, the CEO has ultimate responsibility for the corporation's success. Acting under the direction of the Board of Directors, he or she signs major contracts and approves business arrangements, stock offerings and other legally binding actions on behalf of the corporation.
  • Chief Operating Officer (COO): The COO is responsible for managing the corporation's day-to-day affairs, usually reporting directly to the CEO.
  • Treasurer, or Chief Financial Officer (CFO): The CFO handles all of the corporation's financial matters, including maintaining records and presenting them to shareholders.
  • Secretary: The Secretary is responsible for maintaining and organizing all of the corporation's records, documents, and "minutes" of shareholder meetings. He or she has the authority to send out notices of corporate meetings. He or she is also responsible for reporting information to oversight agencies and, if necessary, the public.

What Can Lead to the Expulsion of a Corporate Director?

A Corporate Director can be expelled from the following infractions:

·       Leveraging directorial powers for things outside of the financial benefit of the corporation

·       Taking advantage of proprietary information for personal profit

·       Agreeing to deals with third parties to persuade a vote at a board meeting

·       Engaging in transactions with the corporation that result in a conflict of interest

Any director who does not act within the statutory standard or breaches his or her fiduciary duties can be held liable, to the corporation, for the damages those actions caused. While corporations can take action to limit their directors’ liability for a breach of fiduciary duty in their articles of incorporation, they cannot completely eliminate the liability for a breach of the duty of loyalty, like intentional misconduct or purposely violating the law. Corporate Directors – both as a group and as separate individuals – and Officers can be sued for actions they take during their employment.

If you have any questions regarding the power and duties of Corporate Directors and Officers, please contact our dedicated, experienced business law attorneys at (630) 324-6666.

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