Who decides whether a corporation will indemnify a director or officer?

In previous cards, you've learned when a corporation has the discretion to indemnify a director or officer, but who actually gets to decide whether the corporation will follow through with its discretion and actually indemnify? There are a few parties to look for. We'll cover them in a moment, but first I want to explain a word you'll see repeated: independent. Whenever you see the qualifier of "independent," it means that the person must not be related to the lawsuit, or transaction, or whatever got the director or officer sued in the first place. Usually, people will always be independent, but you'll want to keep an eye out for any facts that give you a reason to think that a party may be, in some way, directly biased. With that said, let's go through the groups of decision makers who can grant indemnity to directors or officers:

(1) A majority of independent directors. If a board has 10 directors and one of them lost a lawsuit, the other 9 may be able to decide whether or not to indemnify them. This means that a vote of approval would require 5 votes (half + one of the independent directors).

(2) Boards often have committees (small groups of directors who are focused on specific issues or responsible for certain parts of the business). A committee of 2 or more directors may be able to grant indemnification, if they are independent.

(3) If enough shareholders vote in support of indemnification, then a corporation can grant it. What's important is that the shareholders have a combined majority of shares, and they are independent from the issue that got the director or officer sued.

(4) Finally, if a special attorney is appointed to deal with the mess, and they agree the director or officer should be indemnified, then the corporation can adopt their opinion and do so.