Task 2. In the text above find information that justifies (or contests) the following statements

 

1. Corporate governance involves all resources that can help establish proper management and control of a corporation.
2. Corporate governance regulates the relationships between shareholders and stakeholders.
3. Principal/Agent relation implies that those to whom the rights are delegated act in the interest of those who delegate these rights.
4. It’s important to work out the principles that will eliminate the possibility of unfair or dishonest practices to be applied in corporation management.
5. Corporate governance protects the rights of all stakeholders.
6. Nations develop legislation in order to provide stable corporate behavior.
7. The OECD has established Corporate Governance Principles that are legally binding throughout the world.
8. According to the Principles the directors are responsible for the strategy of the company development and for the company management.
9. Pursuant to the Principles the board of directors has to provide clear financial information on financial situation and such information has to be disclosed and available for internal and external control.
10. The Principles impose on the directors the duty to treat all shareholders fairly and equally and empower shareholders to call to account those who violate their rights.
11. The importance of effective corporate governance is absolutely evident.

Task 1. Duties of a Board of Directors

Director’s fiduciary duty

Vocabulary Note:

fiduciary (n) – доверенное лицо;

fiduciary (adj) – фидуциарный, основанный на доверие;

fiduciary duty – обязанность облеченного доверием лица

 

Complete the text with the phrases from the box. Mind the use of proper prepositions with certain verbs and verb phrases.

 

to the shareholders; for his own benefit; for the finances and legal requirements of the corporation; on behalf of the client; on the fiduciary; with the client to the trust's beneficiaries; at the expense; in regard to the client; in good faith; over personal interests; to a client

 

Corporate board members have a fiduciary responsibility to care (1) …………………….. They must act

(2) ……………. and with a reasonable degree of care, and they must not have any conflicts of interest. That is, the interests of the company must take precedence (3) …………………..of individual board members.

 

A fiduciary duty is an obligation to act in the best interest of another party. For instance, a corporation's board member has a fiduciary duty (4) …………, a trustee has a fiduciary duty (5) …………, and an attorney has a fiduciary duty (6) ………………...

 

A fiduciary obligation exists whenever the relationship (7) …………….. involves a special trust, confidence, and reliance (8) ………………….. to exercise his discretion or expertise in acting for the client.

 

When one person does agree to act for another in a fiduciary relationship, the law forbids the fiduciary from acting in any manner adverse or contrary to the interests of the client, or from acting (9) …………… in relation to the subject matter. The client is entitled to the best efforts of the fiduciary on his behalf and the fiduciary must exercise all of the skill, care and diligence at his disposal when acting (10) ……………. A person acting in a fiduciary capacity must follow a high standard of honesty and full disclosure (11) …………and must not obtain a personal benefit of the client.

 

Task 2. Complete the following two texts using the brief information from the chart below. Mind the modal verbs must or may (not).

The duties of the directors are the duty of care and the duty of loyalty.

Duty of Care

A typical corporation statute defining a director's Duty of Care provides that a director's duties must be performed, "with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances." This Duty of Care is very broad, and requires directors to diligently perform their obligations.

…………………………………………..

Duty of Loyalty

The Duty of Loyalty exists as a result of the fiduciary relationship between directors and the corporation.

…………………………………………………

 

Duty of Care

Duty of Loyalty

- in making business decisions the Board must exercise reasonable care in the decisions that it makes for the company, and - believe that the actions are in the best interest of the company based on a reasonable investigation of the options available; or i.e. - carefully consider the available options within the time and financial constraints presented before they make a decision or take a particular action on behalf of the company.

- be loyal to the company and its shareholders and act in their best interest; - develop a relationship of trust and confidence - not act in their own best interest or engage in self-dealing while making decisions or taking actions on behalf of the company; - give the corporation the first opportunity to take advantage of any business opportunities of which they become aware that are within the scope of the corporation's business