Understanding the Types of Shareholder Lawsuits

Boards exist to protect shareholders based on the fiduciary duties of care, loyalty, and good faith. If shareholders feel that those duties have not been met by a board or board member, they can take legal action against them.

shareholder lawsuits

The “business judgment rule” protects boards and board members from lawsuits for simply making bad choices. As LegalMatch shares, “The business judgment rule requires that courts defer to the board of directors in business matters.

The only exception to the business judgment rule is if shareholders can show that the board of directors engaged in fraud, illegal activities, or were grossly negligent while managing the corporation.”

In other words, boards are afforded the right to make bad business choices as long as there is evidence they were acting in good faith. If there is a belief that the board or a board member has engaged in one of those wrongful practices, there are two options for types of shareholder lawsuits: a direct lawsuit (also called shareholder class action lawsuit) or a derivative lawsuit.
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Directorpoint Wins FinancesOnline Awards

screen-shot-2017-06-28-at-4-23-58-pmFinancesOnline, a popular review platform for software and B2B services, recently published a detailed review of Directorpoint‘s board software product.

They highlighted Directorpoint’s ease-of-use, useful features for board productivity, and dedication to security as well as how Directorpoint simplifies the entire board experience.

In addition to this review, Directorpoint is proud to have received two FinancesOnline awards of distinction: the Great User Experience Award and the Rising Star Award. Furthermore, FinancesOnline reviewed Directorpoint’s mentions across various social media channels in order to measure user satisfaction and were only able to locate positive comments and reviews.

We work hard every day to ensure that our users have an outstanding experience using our board software. Our intuitive platform helps launch the boardroom experience into the modern age–while streamlining meeting preparation and overall communication. Many thanks to FinancesOnline for recognizing our efforts!

If you would or your board of directors would like to try our world-class software please reach out and schedule a brief demo, so we can show you how our intuitive desktop and mobile app can help your board make better decisions.

Taking an Unpopular Stand as a Board Member

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Disagreement is a natural part of the boardroom process. In fact, it’s an integral element in decision-making. Diversity of thought helps board members analyze their options from varying angles, which ultimately helps them make better choices as a collective. From time to time, however, you may find yourself as the odd man out. First and foremost, don’t worry; it’s OK to take an unpopular stand, but there is a more effective way to way to do it. Here are our suggestions:

  1. Don’t go silent.

For many directors who realize they’ve adopted an unpopular stance, the choice to go silent makes the most sense. While you may believe that you’re being a better group member by bowing out of discussion, you could actually be doing a disservice to your board. Keep in mind that your opinion has equal value in the board setting, and you may be looking at a problem from a truly unique angle that others need to hear.
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Navigating Corporate Bankruptcy on a Board of Directors

corporate bankruptcy

Because board members have a financial duty to their shareholders, the time may come when an insolvent organization must consider the option of bankruptcy in order to protect those investors’ interests.

In many states, creditors are also designated as stakeholders and must be considered, too. Depending on the type of corporate bankruptcy that is filed, board members may continue to operate in their directorial positions.

As an organization approaches the position of insolvency, board members must consider the options in front of them. According to the Houston Chronicle, “Conducting a thorough financial review and seeking professional help are now the primary concerns.

Directors should avoid resigning because those who quit rather than engage themselves in the bankruptcy proceedings are generally viewed as being in derogation of duty.” In other words, board members shouldn’t jump ship during the company’s moment of greatest need.
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The Pros and Cons of Going Public

Going public IPO

If you’re a board member for a large or fast growing company, there may come a time when you and your colleagues will be asked to determine whether that company should “go public.” Investopedia explains, “Going public refers to a private company’s initial public offering (IPO), thus becoming a publicly traded and owned entity. Businesses usually go public to raise capital in hopes of expanding.”

Companies that decide to go public are not only faced with enormous opportunities to grow their organization, they also have to deal with the downsides or challenges associated with the transition.

According to a survey by The Next Million, these are some of the major challenges of going public:
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What Is an External Auditor? (And Do Boards Need One?)

Close-up Of Businessman Checking Invoice With Calculator At Desk

When it comes to reviewing a company’s financial status, every organization needs a good auditor. Auditors cull through in-depth accounting information in order to ensure that the reporting is a true representation of the company’s financial position.

Auditors also assess things such as risk in order to help guide organizations to a healthier and more prosperous financial future.

Internal audits happen frequently within an organization. Companies utilize their own hired talent to review the work of others or the overall validity of the company’s financial reporting. As the Association of Certified Fraud Examiners explains it, “The internal audit function helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

The scope of internal auditing is broad and may involve the efficiency of operations, IT controls, the reliability of financial reporting, deterring and detecting fraud, and compliance with laws and regulations.”
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What Should You Do After Every Board Meeting?

Your latest board meeting has just ended, but that doesn’t mean your responsibilities are over until the next gathering. In fact, there are several tactics that should be employed after every single meeting to ensure that your board is functioning as effectively as possible.
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Send a post-meeting survey

Send a brief survey after meetings. This 3-5 question survey should ask directors to rate their experience of the board meeting.

Use this opportunity to determine whether board members feel that the agenda was adequately covered and if they have suggestions for future meetings.

It’s important to send the survey shortly after the meeting while the details are still fresh on directors’ minds. (A yearly, more in-depth survey is also a boardroom must.)

Distribute the meeting minutes

It’s important that board directors can quickly and easily review the meeting minutes for accuracy. Board software simplifies this process in a big way and encourages more involvement from directors. Create a clear process for editing the minutes, so board members can follow the time frame.
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How to Strategically Build a Board of Directors

build a board of directors

Outstanding board members certainly don’t grow on trees. In fact, finding the right group of business leaders to impact your organization for the better is a true challenge.

Not only must you consider individual fit and ability, but also how the group will work together. Here are some tips to help you tackle this undertaking in pursuit of exceptional corporate governance.

Think strategically about the organization of your board

Before you can expect directors to think strategically about your organization’s future, you need to think strategically about your board. First, take some time to consider what size board makes the most sense for your organization. Perhaps you’ve been operating with 7 members, but changing to 9 members makes sense for tactical reasons.

Don’t choose a number at random; be sure you can back up the decision with consideration and research. Next, update your board member job descriptions. Make sure that the expectations for directors are clear. You can’t anticipate success from anyone unless you’ve provided them with an outlook for their role.
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Why Boardrooms Need Great Marketing Leaders

Historically speaking, boardrooms have favored business leaders with backgrounds in business strategy and finance. As the technological landscape has progressed, though, they’ve also been eager to embrace individuals with vast experience in cyber risk.

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Marketing and communications professionals, however, have remained on the perimeter of boardroom involvement. But as news and PR cycles continue to grow more powerful, invasive, and easily accessible online, it’s high time for boardrooms to embrace their media-savvy peers as vital corporate leaders.

Just ask United Airlines. In the wake of their current PR nightmare (which involved dragging a man off one of their flights), their CEO released a statement that came across as tone deaf to many readers. Not to mention, United Airlines stock has dropped $1.4 billion in the wake of this crisis. Combine this event with the recent confusion over two teens who weren’t allowed to fly wearing leggings, and you can bet that the United Airlines’ board isn’t having a very good couple of weeks.
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How-to Revive a Disengaged Board of Directors

Although boardrooms are filled with successful business leaders, they’re still comprised of human beings who will occasionally falter. General disengagement is one of the most common struggles that boards will face.
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It’s not a death sentence, though. A disengaged board is not beyond repair! In fact, here are some tips for reviving a disengaged board and getting on the path towards a high-functioning and involved leadership team.

Set clear goals

Many leaders are deadline-oriented and need extremely clear objectives in order to know how much effort they need to exert to meet or surpass expectations. Don’t be afraid to set high goals, so your board members feel the push to excel.
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