Corporate constitutions United States corporate law

in principle, corporation s constitution can designed in way long complies compulsory rules set down state or federal legislature. state laws, , federal government, give broad freedom corporations design relative rights of directors, shareholders, employees , other stakeholders in articles of incorporation , by-laws. these written down during incorporation, , can amended afterwards according state law s procedures, place obstacles amendment simple majority of shareholders. in 1819 case of trustees of dartmouth college v woodward supreme court held majority there presumption once corporate charter made, corporation s constitution subject no other control on part of crown expressly or implicitly reserved charter itself. on facts, meant because dartmouth college s charter not amended new hampshire legislature, though subsequent state corporation laws subsequently included provisions saying done. today there general presumption whatever balance of powers, rights , duties set down in constitution remain binding contract would. corporation statutes start presumption (in contrast old ultra vires rules) corporations may pursue purpose lawful, whether running profitable business, delivering services community, or other objects people involved in corporation may choose. default, common law had historically suggested decisions taken majority of incorporators, , default board removed majority of shareholders reason determined. these default rules take subject constitution incorporators define, in turn take subject state law , federal regulation.

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although possible structure corporations differently, 2 basic organs in corporate constitution invariably general meeting of members (usually shareholders) , board of directors. boards of directors have been subject in modern regulation growing number of requirements regarding composition, particularly in federal law public corporations. particularly after enron scandal, companies listed on major stock exchanges (the new york stock exchange, nasdaq, , amex) required adopt minimum standards on number of independent directors, , functions. these rules enforced through threat of delisting exchange, while securities , exchange commission works ensure ultimate oversight. example, nyse listed company manual rule 303a.01 requires listed companies have majority of independent directors. independence in turn defined rule 303a.02 absence of material business relationship corporation, not having worked last 3 years corporation employee, not receiving on $120,000 in pay, or having family members are. idea here independent directors exercise superior oversight of executive board members, , decrease likelihood of abuse of power. specifically, nominations committee (which makes future board appointments), compensation committee (which sets director pay), , audit committee (which appoints auditors), required composed of independent directors, defined rules. similar requirements boards have proliferated across many countries, , exchange rules allow foreign corporations listed on american exchange follow home jurisdiction s rules, disclose , explain how practices differ (if @ all) market. difficulty, however, oversight of executive directors independent directors still leaves possibility of personal relationships develop conflict of interest. raises importance of rights can exercised against board whole.