Question

For the directors of a corporation, what are their obligations? To whom are they loyal? Is a director an agent of any entity?

Are directors fairly compensated based on the average data provided above? For their six workday meetings a year on average, is $36,000 a year (based on $2,250 per meeting per day and $1,000 per teleconference meeting) fair? Why or why not? Note that the real median person income in the United States in 2016 was $31,099 annually. (Federal Reserve Bank of St. Louis, 2017) Should board of directors earn more in six days of work than the average American does for an entire year?

Answer 1

Board of directors should act in good faith with the corporation should exercise reasonable care while taking decisions and delegating work to officers and employees. The director has the duty to make informed decisions by participating in board meetings, inspecting the corporate books and records and investigating reasonably before taking any decisions. Directors have the responsibility to declare and pay the dividends to the shareholders. Another obligation includes appointing and terminating the officers and the corporate officers who are responsible for managing the daily operations are appointed by the directors. They also have the duty to actively participate in policy changes and take appropriate policy decisions. The board of directors is loyal to the corporation as well as the shareholders. Directors should not oppose any decisions that are taken in the best interest of the corporation. Shareholders select the board of directors utilizing their voting rights and board of directors needs to ensure that the decisions taken by the organization protects the interests of the shareholders. Yes, directors are the agents of the corporation.

In my opinion, the directors are not fairly compensated based on the data given. The time and effort of directors is not compensated fairly based on the data. Directors are handling a critical position that decides the success of the corporation and they should be paid much more than an average worker. From the data it can be seen that there is not much difference between the pay of directors and the real median person income. The directors should be paid more for their work as they are working under high stress and perform duties that can make or break a corporation if not performed well. A higher pay would increase their commitment towards corporation as well as the shareholders and ensure better results.