Legal Question in Business Law in Arizona

Board of Director's rights and protection

I�m currently on the Board of Directors for a small, privately held corporation. I�m also an employee of this same company. It has come to the Board�s attention that there may have been financial dealings undertaken by the executive leadership that are not in the best interest of the corporation. These endeavors were never presented to the Board of Directors.

The question is two parts:

1) What course of actions can the Board take to investigate and rectify the financial deals entered into by executive leadership and

2) Is there any way to protect Board members from retribution since all Board members are also employees and directly report to executive management?


Asked on 8/26/02, 9:15 pm

1 Answer from Attorneys
Charles Aspinwall Charles S. Aspinwall, J.D., LLC

Re: Board of Director's rights and protection

The BOD is the ultimate authority in a corporation. It hires/fires the officers who run the Corp on a daily basis. There is no higher authority. It is the responsiblity of the BOD to correct problems within management, including but not limited to financial mis-dealings. The BOD not only has the power to do this, but it has the responsibility to do this in the best interests of the Corp and the shareholders. Management cannot fire the BOD - it is the other way around.

Exercise your power and discharge your responsibilities - there can be no legal ramifications for doing so.

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Answered on 8/26/02, 10:22 pm


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