Strategic Legal and Social Issues

The Board of Directors of a corporation be vested with the potentiality to enjoyment unified advocators, conduct all tune and control and hold all properties of the corporation. The peremptory employment office insofar as the counsel of the business regular and ordinary personal business of the corporation is vested with the Board of Directors. With great power however comes great responsibility. Directors interpret as fiduciaries to the corporation, and once elected they essential avail the best fires of the corporation and the sh beholders.This fiducial work arises pop out of the mount ups fiduciary kindred with the corporation and sh arholders. (Saboor H. Abduljaami p2) The following be the three-fold duties of a handler province of respectfulness duty of diligence and duty of obedience. trans executeion of Obedience The duty of obedience compositiondates that all handler of the corporation must do and come only those turn of eventss designed to comp ass its mission. The mission and goals of the corporation be indicated in the articles of incorporation.Thus, the music theatre managing theatre director must constantly snap off whether his action is within the scope of his authority and in pursuance of the goals of the comp both as indicated in its articles of incorporation. (Role Playing When do Board Members Step Over the communication channelp2) nurture, obedience does non only smashed compliance with the retrieves of the corporation scarce it withal means in varianting the corporation of whatever act d unity in irreverence of the find oneselfs of the corporation. This means that every director is mandated to terminate from violating the internal rules of the corporation.As directors they be alike(p)wise take to inform the corporation of all wrongdoing move by one director that seriously prejudices the concern of the corporation. Thus, a director who go forthfully and knowingly votes or assents to pat ently un constabularyful acts of a nonher director renders him jointly and severally liable(p) for any damage solutioning to the corporation. responsibleness of Diligence The rule is that every director of the corporation is required to manage the corporate personal business and perform his functions with reasonable care and prudence.As an military officer of the corporation, the responsibility of the director towards the corporation is non limited to willful kick downstairs of devote or excess of power but extends to negligence. This means that even if there was no un integrityful invention or hellish motive in performing a corporate act, he can dumb be held liable if it can be established that he acted negligently. This liability of a director for his negligent acts rests upon common law rule which renders the agent liable who violates his authority or neglects his duty to the damage of the principal. It must be stressed however that the arcdegree of diligence require d of a director is relative.The standard of diligence is that which an ordinary judicious director could reasonable be evaluate to exercise in a like position under similar circumstances. The directors are also bound to observe the limits pose upon their powers in accordance with the Articles of Incorporation or charter, and if they transcend such limit and piddle such damage, they incur liability. (Ruben Ladia, p. 164) Thus, if a director willfully performs an act which he knows or ought to know to be unauthorized and beyond the scope of his authority, he is clearly liable for any injury.It is however essential to enounce that though directors are liable for their negligence which has caused serious prejudice to the corporation, they are not liable for losses due to the imprudence or honest error of judgment. This is the concept of business judgment rule which is a self-abnegation on the part of the director to flight of stairs any liability for his actions. In principle, th is states that questions of indemnity and management are left but to the honest decision of the board of directors and the courts are without authority to substitute its judgment as against the director.It is said that business judgment rule is purely a character law derived concept whereby a court will not review the management decisions of a corporations board of directors transfer some sort of showing that the board of directors violated their duty of care or verity. (Jon Canfield 1) It must be stressed that directors are not insurers of the property of the corporation or guarantors of the succeeder of the corporation. So long as the director exercised reasonable diligence in the performance of its function the courts will not interfere and render it liable for negligence. Duty of LoyaltyIt is a general familiarity that there exists a fiduciary human relationship between the directors of the corporation and the corporation and its stockholders. As fiduciaries, they are e xpected to act with purpose candor and fair dealing for the interest of the corporation and without taint of selfish motives. Thus, the directors are not only required to act with reasonable diligence in managing the affairs of the corporation, they are also expected to act with utmost skilful confidence. Thus, the directors of the corporation are expected to first serve the interest of the corporation and their interest later.They are enjoined not to manipulate the affairs of the corporation to the scathe and disregard of the standards of morality and decency. As corporate interiorrs, the director cannot utilize any inside information they have acquired for their own benefit. He cannot violate the requirements of fair play by doing indirectly what he cannot do directly. Further as directors of the corporation they are not allowed to obtain any personal gather, commissions, grant or gain for their official actions. Lastly, a director is prohibited from seizing any business op portunity or maturation it at the expense and with the facilities of the corporation.Thus, the duty of loyalty requires a fiduciary to act in the best interests of the corporation and in good faith. (Jiangyu Zhu 2) Thus, as corporate officers an undivided loyalty is expected of every director. This fiduciary relationship between the director and the corporation chew the fats a strict duty to act in accordance with the highest standard which a man of the finest honor and reputation might impose upon himself. It must be stressed that the duty to act with utmost good faith is imposed upon all the directors.The law imposes upon the director liability for violating this duty of loyalty irrespective whether the director actually received profit from his un unwrapd performance. This was affirmed in the case of feature software system v. Fassihi. Case of event software system v. Fassihi. Facts Item Software entered into transaction with an some other company. Item Software has a mana ging director and a marketing director. It specifically provided in its nonplus with the marketing director that it cannot take advantage of any unavowed information it has learned while sedulous with Item Software.It appears that while Item Software and the other company were engaged in negotiations, its marketing director had been visiting the other company informing it of his intention to form a new company and his intent to transact directly with the other company. The contract between the two companies did not materialize. Item Software later found out about the actuations of its marketing director. He was lastly summarily dismissed from employment and sued by his own company. Issue whether the respondent should be held liable by the corporation for its act of disloyalty even if it did not profit from its misconduct.Held It is external whether the director profited from his misconduct. The sole factor to be determined here is that the director committed a breach of its duty when it failed to disclose its transactions with the other company. The duties of a director imposed by law are generally higher than those imposed on an employee because he is more than simply a general manager of the company, he is a fiduciary who, with his fellow directors, is responsible for the success of the companys business.Section 317 of the Companies modus operandi of 1985 states that it is the duty of the director of a company, who is in any way, whether directly or indirectly, elicit in a contract or proposed contract with the company to declare the temper of his interest at a contact of the directors of the company. (Section 317 Companies Act of 1985) Thus, the marketing director was in breach of his duties both as an employee and as a director and the Item Software was entitled to recover from him damages for breach of that duty suffered as a result of the termination of the contract.