Regarding the Revised Model Business Corporations Act, what are the duties of the directors and what are the duties of the officers as set forth in the Act, and how might they be explained and illustrated? Revised Model Business Corporations Act

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First the difference between directors and officers is that, while in corporations the roles may be filled by the same individual, (1) the officers are appointed by the directors, (2) the officers have the authority to legally bind the corporation in contracts and other actions, (3) officers are generally not personally liable for the consequences of lawful actions taken by the corporation (though they may have personal liability for unlawful actions).

The duties of directors cover corporate growth and operation with the profit of the shareholders in mind. The directors are bound by the laws of the legal entity under which they are incorporated. Their duties include:

  • quality performance and strategic planning
  • risk assessment and management
  • appointment, oversight and compensation of senior officers, like president, vice presidents, chief executive officer (CEO), chief financial officer (CFO), secretary, and treasurer
  • legal compliance
  • ethical standards and conduct
  • oversight and preparation of annual financial statements

These duties can be explained, in addition to the comments above about shareholders, by saying that the board of directors establishes the operational, financial growth and moral compasses of a corporation and must provide oversight and planning frameworks from within which to maximize earnings while still being in compliance with legal and ethical necessities. An illustration is the past great controversy over building expansion that might endanger a threatened species of owl in Northern California. The corporation had to weigh corporate expansion, profit and jobs with ethical obligations to ecosystems and the biosphere in taking action and making decisions.

The duties of officers are as varied as their titles. The president and/or CEO are directly under the board of directors and act according to their directions to carry out the day-to-day, near-term and long-term operations and plans for the corporation while being responsible for entering into legal business arrangements, contracts and stock offerings. The CFO and/or treasurer keeps, maintains and authenticates the accuracy of the corporations financial records, on which the board reports annually. The secretary records corporate meetings and other recordable events while also issuing reports to corporate oversight agencies, like the Securities Exchange Commission (SEC). As a single example to illustrate, the CEO will be responsible, under the direction of the board, for determining share offerings and when and how shares will be offered: as a split, as perquisites to officers, as preferred shares, etc.

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