Choosing a Business Form 241Directors
At the directors’ level, absent a special provision in the corporation’s charter,
all decisions are made by majority vote. Typically, directors concentrate on
long-term and significant decisions, leaving day-to-day management to the offi-
cers of the corporation. Decisions are made at regularly scheduled directors’
meetings or at a special meeting if there is need to respond to a specific situa-
tion. Under most corporate laws, no notice need be given for regular meetings,
and only very short notice need be given for special meetings (24 to 48 hours).
The notice must be sent to all directors and must contain the date, time, and
place of the meeting but, unlike stockholders’ notices, need not contain the
purpose of the meeting. It is assumed that directors are much more involved in
the business of the corporation and do not need to be warned about possible
agenda items or given long notice periods.
At the meeting itself, no business can be conducted in the absence of a
quorum, which, unless increased by a charter or bylaw provision, is a majority
of the directors then in office. Ref lecting recent advances in technology, many
corporate statutes allow directors to attend meetings by conference call or
teleconference as long as all directors are able to hear and speak to each other
at all times during the meeting. Individual telephone calls to each director will
not suffice. Unlike stockholders, directors cannot vote by proxy, because each
director owes to the corporation his or her individual judgment on items com-
ing before the board. The board of directors can also act by written consent,
but, even in Delaware, such consent must be unanimous, in recognition that
the board is fundamentally a deliberative body.
Boards of directors, especially in publicly held corporations with larger
boards, frequently delegate some of their powers to executive committees, or
other committees formed for defined purposes. However, most corporate
statutes prohibit boards from delegating certain fundamental powers, such as
the declaration of dividends, the recommendation of charter amendments, or
sale of the company. The executive committee can, however, be a powerful or-
ganizational tool to streamline board operations and increase efficiency and
responsiveness.
Although directors are not agents of the corporation—in that they cannot
bind the corporation to contract or tort liability through their individual ac-
tions—they are subject to many of the obligations of agents discussed in the
context of partnerships, such as fiduciary loyalty. Directors are bound by the
so-called corporate opportunity doctrine, which prohibits them from taking
personal advantage of any business opportunity that may come their way, if the
opportunity would reasonably be expected to interest the corporation. In such
an event, the director must disclose the opportunity to the corporation, which
normally must consider it and vote not to take advantage before the director
may act on her or his own behalf.
Unlike stockholders, who under most circumstances can vote their shares
totally in their own self-interest, directors must use their best business judg-
ment and act in the corporation’s best interest when making decisions for the