Interpret the legal factors involved in corporate management and ownership - Essay Example

Factors involved in corporate management and ownership Factors involved in corporate management and ownership Success in every corporation is determined by the strength of corporate governance that it adopts. “Corporate governance refers to the manner in which the power of a Corporation is exercised in the stewardship of the Corporation’s entire portfolio of assets and resources with an objective of maintaining or increasing share holder value and satisfaction of all stake holders in the context of its corporate mission”(Mann and Roberts,2010).

In case of a breach of these rules, which is precisely the company’s By-laws, the aggrieved party can establish a good course of action against the party in default. For instance, share holders can sue the board of directors for an act they negligently commit or in breach of set By-laws. Jane, who is a share holder, is aggrieved by the boards’ decision to invest heavily in the company’s growth in negligent reliance on its officer’s financial reports. It is therefore important to establish whether the directors are liable or not while giving reasons for or against this assertion.

In establishing liability, the most important consideration is whether the management acted within their authority or not which is derived from the company’s By-laws. This is the main reference in case of any conflict. However, there are general duties expected of officers which seem inherent in all corporations.Directors or officers to any Corporation are expected to perform daily duties with loyalty and obedience. “Among the daily duties of such workers include strategic planning, putting in place internal controls to ensure proper book keeping, implementing any devised strategies and setting up committees” (Whincup, 1998).

The above case reveals a kind of directors who present faulty financial reports and the shareholder on full reliance of the reports incurs considerable losses. The directors in this question acted within their authority since book keeping falls within their job specification.However, they can be discharged from this liability if they can show that they acted in good faith and not in a fraudulent manner. This comes in especially where other persons acted on their behalf. They are however still liable since the acts were committed by their agents.

The business judgment rule can be a good defense for the officers. “The rule immunizes corporate management from liability for actions that are undertaken in good faith, when the actions are within both the power of the corporation and the authority of the management” (Miller, 2011). From the foregoing, the directors might have acted in good faith. However, they might have not acted with due diligence which is itself a breach of their fiduciary duty. As an ombudsman, I will hold the directors liable because the shareholder invested depending entirely on their records which is expected of every shareholder.

The directors ought to have ensured that whatever they posted in the records were correct to the best of their knowledge.ConclusionIn this context, the board of directors is liable but in solving such an issue the most important consideration is the interest of the company to maintain a good relationship between involved parties while ensuring progress in its activities. The parties will therefore resolve the issue through arbitration.References:Mann R, A. & Roberts B, S. (2010). Essentials of Business Law and the Legal Environment, New York, NY: Cengage Learning, 3(7), 112-119.Miller, R.L (2011).

Business Law, Texts and Exercises, 6th Ed, South-Western, Cengage Learning, 14(2), 606-608.Whincup, M. (1998).Modern employment law: A guide to job security and safety at work, 9th Ed. Portsmouth, NH: Heinemann, 7(1), 698-712.