I want to continue my effort to post a few articles about basic corporate law issues. Last time I wrote about about corporate governance. This week, I’d like to discuss dealing with the Board of Directors (the “Board”). The members of the Board of Directors are elected by the shareholders of a corporation. Their job is to manage and supervise the company’s officers and management and to look out for the interests of the shareholders. Directors owe the shareholders/company a “duty of care” and a “duty of loyalty” while serving on the Board.
The Legal Department interacts with the Board in several ways. Typically, the Corporate Secretary (the person who manages the operational aspects of the Board along with other duties related to maintaining the corporation) sits in Legal. Often the General Counsel is also the Corporate Secretary. The Corporate Secretary works closely with the Chairman of the Board and the Governance & Nominating Committee. The Chief Compliance Officer may also sit in Legal and works closely with the Audit Committee. Similarly, any significant litigation, contract, acquisition, or other material legal event will come to the attention of the Board and may require its input or approval in some instances. The Board will take up these legal matters at regularly scheduled Board or committee meetings, or at a special meeting if the circumstances warrant. When these ad hoc legal events come to the attention of the Board, various members of the Legal Department may be invited to the meeting in order to present the issue to the Board or be a subject matter expert for any questions the members may have. Any in-house lawyer can be intimidated the first time they meet the company’s Board of Directors or prepare materials for them (even if it’s just responding to an email). This edition of “Ten Things” will give you some pointers on how to deal with the Board: