USA Law and Practice Contributed by: Lisa Fontenot, Jennifer Broder, Per Chilstrom and Lothar Determann, Baker McKenzie
pany’s strategic direction, adopting an annual budget and financial objectives, appointing and establishing compensation or terminating the CEO and other senior officers; • establishing board committees; • delegating authority to officers and committees and others; • adopting employee benefit plans; • adopting significant corporate policies and major changes in accounting principles; • retaining and overseeing the independent auditor; and • indemnification. Officers manage routine business operations. Shareholders make decisions on certain key matters, including: • director elections and removal; • amendments to the certificate of incorporation and bylaws; • fundamental corporate transactions (eg, mergers, sales of substantially all assets, acquisitions, dis - solution); • advisory votes on executive compensation; • equity compensation plans; and • auditor ratification. LLC and partnership decision-making authority may Boards and board committees act through resolutions adopted at meetings or by written consent, subject to quorum and voting requirements set by law and governing documents. Decisions are documented in meeting minutes prepared by the corporate secre - tary of the meeting. A majority of directors present at a meeting at which a quorum is present is typically required, unless bylaws specify otherwise. The board can also act by execution of unanimous written con - sents. Officers act under delegated authority. be customised extensively by contract. 2.3 Decision-Making Processes Shareholders act through meetings or, where permit - ted by state law and organisational documents, writ -
ten consents. Shareholders may also submit share - holder proposals, privately or publicly engage with the board and/or management, or obtain representa - tion on the corporation’s board, either by nominating director candidates for election by shareholders or by agreement with the board. LLCs and partnerships follow the procedures speci - fied in their governing agreements, which generally require no meetings. US companies employ a single‑tier board structure with board-established committees. Boards may be classified or elected annually, subject to state law and organisational documents. A classified, or staggered, board is composed of directors that have different overlapping, multi-year terms so that not all the direc - tors’ terms expire in the same year, both providing continuity and making it harder to replace the entire board at once. Classified boards have become less common due to evolving views in the institutional investor community regarding governance best prac - tices. 3.2 Board Members Directors owe fiduciary duties of care and loyalty, and are responsible for oversight of business risk, policy- making and strategic guidance. Boards commonly include management and independent directors. Their independence is critical for legal benefits and conflict of interest transactions, and directors are generally permitted to rely, within reason, on information pro - vided by management and outside advisers in satisfy - ing fiduciary duties. Key leadership roles include the chair of the board and, where the chair is a member of management such as the CEO, a lead independent director. Boards typically operate through standing and special com - mittees, as discussed in 1.3 Companies With Publicly Traded Shares . 3. Directors and Officers 3.1 Board Structure
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