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Corporations • Directors and Officers
CORP#033
Legal Definition
Officers owe the same duties of care and loyalty as directors, and are agents of the corporation with the power to bind the corporation by their authorized activities. Directors have virtually unchecked power to select officers and may remove them from office at any time, although the corporation may be liable for breach of contract damages.
Plain English Explanation
Officers are agents of the corporation and owe the same duties as directors. They serve at the whim of directors. If you're confused about who is an officer and who is a director, officers usually have an "O" in their title, like Chief Executive Officer ("CEO"), or Chief Financial Officer ("CFO"), etc. Other examples of officers are the President, Vice President, and Treasurer of a company. Directors usually manage big-picture actions for a company, whereas Officers are in charge of day-to-day management of the company's specific actions.
Though Officers are not as powerful as Directors, they still have the power to create liabilities (by entering into contracts) and owe the company the same duties as Directors. By default, an Officer can be removed at any time, for any purpose, by a Director. The only exception is if the Officer has an employment contract. For example, if a CEO is hired and signs a 1 year employment contract, but is later fired before the end of their contract, the company may have to pay damages for breach of the employment contract.
Though Officers are not as powerful as Directors, they still have the power to create liabilities (by entering into contracts) and owe the company the same duties as Directors. By default, an Officer can be removed at any time, for any purpose, by a Director. The only exception is if the Officer has an employment contract. For example, if a CEO is hired and signs a 1 year employment contract, but is later fired before the end of their contract, the company may have to pay damages for breach of the employment contract.
Related Concepts
Can a corporation indemnify an officer or director who is held liable to their own corporation?
Can a corporation indemnify an officer or director who successfully defends themselves against a lawsuit from another party?
How can a director defend against a claim that they breached their duty of loyalty?
What are some common examples of permissive indemnification?
What are the statutory requirements of board of directors meetings?
What are the statutory requirements of directors?
What duties do directors have to the corporation and shareholders?
What is the business judgment rule?
What is the duty of care?
What is the duty of loyalty?
What is the duty to disclose?
What is the duty to manage?
When do officers and directors often seek indemnification?
Who decides whether a corporation will indemnify a director or officer?
