Very generally stated, the Board of Directors of a California corporation is responsible for the way in which the corporation is run. California law requires every corporation in the state to have a board of directors and, according to the text of the law, “all of the activities and affairs of a corporation shall be conducted and all corporate powers shall be exercised by or under the direction of the board.” While this may make is seem as if a company’s board of directors participates in the everyday management of the business, this is usually not the case, and corporate boards regularly delegate management of a business to individuals who may or may not be a member of the board.
How is a Board of Directors Formed?
When a company incorporates, it is required to file a document called “articles of incorporation” with the Secretary of State’s Office. This document establishes much of the basic identity about a corporation, including its name, how much stock it will issue, and the way in which the board of directors will be chosen. California law requires that every board of directors has a chairperson or a president (or both), a secretary, and a treasurer or chief financial officer (or both), as well as any other named officers that may be required by a corporation’s bylaws.
Boards of Directors Generally Appoint a Chief Executive
While California law provides that the board is responsible for the management and operations of the company, in practice it would be difficult and onerous for a multi-member board of directors to make the decisions required for day-to-day operations. As a result, a board usually appoints a chief executive to run the company and whose performance is evaluated on a regular basis by the directors.
Boards of Directors and Fiduciary Duty
In publicly traded companies, boards of directors have a fiduciary duty to the shareholders of the company. A fiduciary duty is the highest that can be imposed by law and requires the party who owes the duty to act solely in the interest of the party to whom the duty is owed. For this reason, members of a corporate board of directors must always be careful to not engage in conduct that may place their own interests above those of a corporation’s shareholders.
Call a Silicon Valley business law firm today to schedule a consultation with an experienced attorney
Issues related to corporate law and governance can be extremely complicated and have a significant impact on the success of a business. For this reason, it is important for anyone that is considering incorporating to meet with an attorney to discuss his or her situation and ensure compliance with California’s Corporations Code. The lawyers of Structure Law Group, LLP are committed to providing startups and existing business with solution-oriented legal counsel and representation. Call our office today at 408-441-7500 to schedule a consultation with one of our San Jose corporate law attorneys. You may also reach the firm by email by submitting our online contact form.