Choosing a Business Form 243involved in the original decision. The decision of such a committee is much
more likely to be upheld in a court of law, although the decision is not immune
from judicial review.
A more detailed discussion on the board of directors is contained in
Chapter 15, “The Board of Directors.”
Off icers
The third level of decision making in the normal corporation is that of the
officers, who take on the day-to-day operational responsibilities. Officers are
elected by the board and consist, at a minimum, of a president, a treasurer, and
a secretary or clerk (keeper of the corporate records). Many corporations elect
additional officers such as vice presidents, assistant treasurers, CEOs, and
the like.
Thus, the decision-making control of the corporation is exercised on
three very different levels. Where each decision properly belongs may not be
entirely obvious in every situation. The decision to go into a new line of busi-
ness would normally be considered a board decision. Yet if by some chance the
decision requires an amendment of the corporate charter, a vote of stockhold-
ers may be necessary. On the contrary, if the decision is merely to add a
twelfth variety of relish to the corporation’s already varied line of condiments,
the decision may be properly left to a vice president of marketing.
Often persons who have been exposed to the preceding analysis of the
corporate-control function conclude that the corporate form is too complex for
any but the largest and most complicated publicly held companies. This is a
gross overreaction. For example, if Phil, our software entrepreneur, should de-
cide that the corporate form is appropriate for his business, it is very likely that
he will be the corporation’s 100% stockholder. As such, he will elect himself
the sole director and his board will then elect him as the president, treasurer,
and secretary of the corporation. Joint meetings of the stockholders and direc-
tors of the corporation may be held in the shower adjacent to Phil’s bathroom
on alternate Monday mornings.
Limited Partnerships
As you might expect, the allocation of control in a limited partnership ref lects
its origin as a hybrid of the general partnership and the corporation. Simply
put, virtually all management authority is vested in the general partners. Like
outside stockholders in a corporation, the limited partners normally have little
or no authority. Third parties cannot rely on any apparent authority of a limited
partner because that partner ’s name will not appear, as a general partner ’s
name may, on the limited partnership’s certificate on the public record.
General partners exercise their authority in the same way as they do in a
general partnership. Voting control is allocated internally as set forth in the
partnership agreement, but each general partner has the apparent authority to