Discuss the legal relationship of corporate shareholders, directors, officers, and employees.
Most corporations consist of shareholders and stakeholders. Shareholders own part of the company through stock ownership. Shareholders cannot directly interfere with the director or management of the corporation. Stakeholders are employees, supplies, customers, creditors, and the overall community that interacts with the company. Shareholders bottom line is increasing the value of the stock. Shareholders are interested in the overall performance of the company not just for looking at the profit margin. The shareholders elect and hire the stakeholders including a board of directors that oversee the operations of the corporation. The shareholders ultimately have control over the company’s board of directors and have control of the CEO. The CEO acts on the company’s behalf and is held accountable to the business's shareholders for making profits. The fiduciary duties are legal concepts that form the basis of a CEO's legal relationship with his company's owners. The shareholders' relationship with the CEO entails both a binding contract and the trust of that CEO in controlling the shareholders' property.
A CEO's legal responsibilities to his company's shareholders are broken down into three distinct fiduciary duties: the duty of care, the duty of loyalty and the duty of disclosure. The duty of care refers to the CEO's responsibility to consider all of the available information relevant to business decisions, including the advice of experts and employees. The duty of care also includes the
