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7 Rules of Conduct for Corporate Directors

Below are seven general rules of conduct for corporate directors:partnership

(1)    Attend all board of director meetings if at all possible.  If it is impossible to attend a certain meeting, find out what transpired at the meeting by reading the minutes of the meeting and talking to other directors who were in attendance.

(2)    If it is impossible to attend board of director meetings on a regular basis, consider resigning because the constant failure to attend the meetings for any reason (even illness) is a breach of duty and may result in personal liability.

(3)    Take notes at all board of director meetings attended and keep a personal record of them.

(4)    Read the minutes of all meetings, including those not attended, and insure that the minutes contain an accurate record of such meetings, including the voting records of the directors.

(5)    Become familiar with financial reports and legal opinions prepared by the corporation’s accountants and attorneys.  Don’t take someone else’s word for their content.

(6)    Don’t vote, or even participate in discussions, on matters of personal interest, especially if it relates to compensation or employment, unless such voting is specifically authorized by a statute or a valid article of incorporation or bylaw provision.  Even then, refrain from voting if possible.

(7)    Don’t enter into agreements that could compromise the ability to exercise independent judgment on behalf of the corporation unless it is clear that the agreement is legally valid and in the best interest of the corporation.

More information on conduct of directors is available in Argyle Publishing’s Handbook of Small Business Organizations.

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