What is the role of the Board of Directors or Board of Trustees in a corporation? (Section 22, RCC)

Attorney Chris Batan Lasko introduces the topic of the Board of Directors (for stock corporations) or Board of Trustees (for non-stock corporations), highlighting their function as the governing body responsible for exercising corporate powers, entering contracts, and setting policies.

The speaker explains that while stockholders elect the board, the board holds the governing power for practicality, convenience, and efficiency. It would be inefficient for all stockholders to decide every corporate action, making a smaller group (the board) more effective. Stockholders can, however, replace board members in subsequent elections if they are unhappy with their decisions.

The powers of the corporation are exercised by the board collectively, as a body, not individually. Decisions are made in meetings, requiring a quorum, which is defined as half plus one of the total number of directors/trustees. Once a quorum is met, decisions are made by majority vote of those present.

Corporate officers like the president, secretary, or treasurer cannot generally bind the corporation without the explicit authority of the board of directors. While the board can delegate some powers, such as entering contracts, they cannot delegate discretionary powers (e.g., declaring dividends), the entire supervision and control of corporate affairs, powers specifically given to them by stockholders, or powers restricted by the company bylaws.

The business judgment rule states that courts will not interfere with the board's governance decisions as long as their actions are within the corporation's powers (intra vires acts) and there is no evidence of bad faith or malicious intent, even if those decisions result in losses. This rule acknowledges that directors are not infallible and are given liberty to make decisions for the corporation.