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Responsibilities of the Board of Directors
The Board of Directors a group of persons elected to govern the affairs of a corporation. Two of the primary responsibilities of the Board of Directors of a corporation are:
- To protect the shareholders' investment and
- To ensure investors receive an adequate rate of return on their equity investment.
The Board of Directors also participates in making strategic decisions including: evaluating the compensation plan for the corporation’s key executives, determining stock dividends, and recommending against or for stock splits or stock dividend payments. The Board of Directors votes on acquisitions or mergers involving the corporation. Finally, the Board reviews and with the approval of the Board's Audit Committee approves the company’s financial statements for filing, release and publication.
Generally, a certificate of incorporation includes language that exempts directors of the corporation from personal laibility. Generally, a Board of Directors' decisions enjoy protection under the Business Judgment Rule. This Rule creates a presumption that the Board acted in good faith, was informed of the facts and risks and acted based on a honest belief that their decision was in the best interest of the Corporation even if the decision made and authorized turns out to be a mistake.
Claims made against the Directors of a Corporation alleging breach of their fiduciary duty, or acting in bad faith and loyalty can be dismissed by a court, except when the claimant is able to provide information in their pleading that shows the Director or Directors' conduct falls into one of the exceptions under which Directors may become personaly liable for their actions or inactions.
© 2010. Michael C. Dennis. All Rights Reserved.