However, the process was unstructured: there were no annual terms for the board members and no formal election process. Bob and Rex should have put in contractual agreements with the board members, which defined their roles and responsibilities on the board. Additionally, they should have put in performance based incentive plans for the board members to further incentivize them. Furthermore, a formal selection plan should have been drafted to select the board in future: how many members, their expertise, tenure, etc. This plan would have been very useful if someone on the board decided to leave or if they would have wanted to add a new
Finally, and perhaps most importantly, consider what the prospective directors ' affiliation might be with executives. Members of the board are often obliged to make arduous decisions concerning finances, personnel and salaries. Ensure that potential members do not have a conflict of interest concerning management and other key personnel. Professionals emphasize board members must
In accordance with business dictionary writes, "governing body (called the board) of an incorporated firm. Its members (directors) are elected normally by the subscribers (stockholders) of the firm (generally at an annual general meeting or AGM) to govern the firm and look after the subscribers ' interests". The responsibilities of the board of director firstly, defining the purposes and procedures, which are the part of the company 's strategy and compliance because the purpose encourages the company to reach the goals step-by-step. Secondly, the director should monitor the progress during an achievement of those purposes and procedures. Thirdly, senior management is also appointed, hired, monitored, evaluated and fired by the directors (the member of the board include senior called inside directors or executive directors. Fourthly, determining and paying the dividend. Lastly, responsible with the activities of the company that relevant many parties.
These actions allowed the board of directors and management to amend the company’s charter and allowed shareholders four votes per share. The board of directors was also re-structured into classes, in which each class serves staggered three-year terms (Wheelen & Hunger).
Harley Davidson has been identified by some in the press as having weak corporate governance. This could be true for a myriad of reasons including directors not preforming their fiduciary obligations by putting their personal goals ahead of the goals of the true owners; the stockholders. Weak corporate governance can be very hard to identify in many instances. The decisions a board makes can take years to come to fruition, so identifying poor governance could be extremely delayed. Stock price or company health is also not a good indicator in all cases such as in the case of Tenet Healthcare. The CEO, Jeffrey Barbakow, delivered six years of record growth when the company imploded in 2002. (https://www.forbes.com/forbes/2003/0512/106.html). Tenet was investigated for Medicare fraud and was ousted from the board and the stockholders in turn suffered great losses. Guarding against having a board that engages in poor governance can be mitigated by ensuring that most of the members are independent directors. This alleviates most of the possibility of conflict of interest. In examining Harley Davidson to better understand their governing process, we will try to answer some basic questioned gleaned from their article of incorporation, bylaws, and stockholder’s agreements located on their corporate website. The first question, and one of the most important as it relates to independence is, “Are the CEO and Board Chairman the same person?” In this case, Harley Davidson’s board does
In Bezirdjian v. O’Reilly, the plaintiff (Bezirdjian) files a shareholder derivative complaint on behalf of Chevron Corporation citing that current and certain former member of Board of Directors (BOD) breached fiduciary duties, grossly managed the corporation, were involved in constructive fraud, and wasted corporate assets “in connection with illicit payments Chevron allegedly made to Saddam Hussein in exchange for Iraqi oil from 2000 to 2003.” Bezirdjian has a legal right to bring an action against the alleged party because he believes that harm has been done to Chevron in connection to illicit payments made to Saddam Hussein but the corporation itself has not taken any action against the offenders.
Summary – This case looks a decision that George Hausman, the co-founder and CEO of Refresh Organics (RO), makes regarding creating a board of directors. RO is a midsize, steadily growing, privately owned company which is a distributor of organic produce. RO has never had a formal board of directors, but Hausman had several close business advisors who he consulted with regularly and referred to as “the kitchen cabinet.” Hausman considered putting together a true board of directors or if simply making an advisory council would be better suited for the needs of RO. Ultimately, Hausman decided to form a board of directors of ten members, including himself and three out of four members of “the kitchen cabinet,” replacing his wife, an
In many misfeasance cases against directors, those breaches maybe relatively uncontroversial. This draws into focus the question of whether the director has any common law or statutory defence, including the Duomatic principle and ratification by shareholders (CA 2006 S.239), available to a claim against him for restitution to the company. S.239(6)(a) preserves the Duomatic rule that if an informal unanimous consent is reached among voting shareholders, it is unnecessary to pass such ratification resolution through general meeting or written resolution. The first part will examine the scope and requirements of this rule to illustrate the validity of such assent. S.239(7) leaves the door open for rules of law, which refers to common law principles, to continue guiding ratification. It will be assessed how these rules impose limitations on the general ratification power conferred by s.239.
“The business judgment rule, as a standard of judicial review, is the common law recognition of the statutory authority that has been vested in the board of directors (Shu-Acquaye, 2004).” “Under the rule, which operates as a standard of judicial review, the burden is placed on the party challenging a decision of the directors to establish facts rebutting that presumption (Skinner, 2006).” “Courts invoke the business judgment rule in assessing the conduct of directors and determining whether to impose liability in a particular case (Shu-Acquaye, 2004).” This rule does not provide unlimited protection for directors though. “Although, the business judgment rule is designed to foster the complete exercise of managerial power granted to directors, it is not an unfettered power (Shu-Acquaye, 2004).” “Consequently, the business judgment rule does not afford protection to directors who exercised "unintelligent" or "unadvised judgment," or who submitted to "faithlessness, fraud, or self-dealing (Shu-Acquaye, 2004)."” “Application of the business judgment rule is based on a demonstration that informed directors did in fact make a business judgment sanctioning the matter being examined. A director's obligation to inform himself, in preparation for his decision, derives from the fiduciary capacity in which he serves the company and its stakeholders (Shu-Acquaye, 2004).” “So long as the directors’ decision was reasonably informed and can be attributed to any rational business purpose, a court will not substitute its own notions of sound business judgment for that of the directors, unless that presumption is rebutted (Skinner, 2006).” Prior to the court’s decision in Smith v. Van Gorkom, the court was reluctant to hold boards liable for breach of
The study conducted by Hardjo and Alireza (2012, p. 4) represented that the independent directors have a few understandings of the company’s circumstances, and make decisions depends on what the management provides (Hardjo & Alireza, 2012, p. 4). Although Gallagher and Bennie (2015, p. 20) contended that the independent directors are likely to express their individual opinions and focus on the interest of the company. Thus, the formation of the directors’ board with a significant number of independent directors might not prevent DSE from the downfall due to reliance on filter information which is not adequate to make decisions (Rankin et al., 2012, p.
The Board and its Committees did not function in a way that made it likely that they would notice red flags. The outside Directors had little or no involvement in the Company’ s business other than through attendance at Board meetings. Nearly all of the Directors were legacies of companies that WorldCom, under Ebbers’ leadership, had acquired. They had ceded leadership to Ebbers when their
According to Shleifer and Vishny (1997), corporate governance is the system, by which corporations are directed and controlled. On the other hand, an independent director is a person that has at no time, worked for the company nor owned shares in the company. This director also would not be related to any of the key employees nor would have worked for any major supplier, customer or service providers, such as consultants, accountants, lawyers, etc.