Utah’s first general incorporation statute found print in 1870 and displayed characteristics both of its predecessors and regional counterparts. First, the statute enabled Mormon and Gentile alike to incorporate. More precisely, the statute muted rising Gentile criticisms and put Mormon and non-Mormon merchants on the same legal footing. Second, for Utah as for many other territories in the region, a general incorporation act was another of numerous trappings necessary for statehood. Utah has come a long way since then.
Today, businesses across Utah are growing rapidly. Many rapidly growing businesses are operating from Herriman, Utah. As a business grows so does the regulations that govern the business. However as a business owner, the regulations should not scare you. Instead you should speak to an experienced Herriman Utah corporate lawyer. The right corporate lawyer can advice you on how to manage your and grow your company.
Your company’s board of directors has its own set of responsibilities and duties. Good management, in the context of concern for the future of the company, will achieve a harmony of profit, the interests of the stakeholders, and other ethical goals. Conversely, when management fails to think in terms of the broader social dynamics in which it operates, it will be unlikely to anticipate changing client needs and its performance will, over time, decline. No government regulations, no board of directors, no federal agency can offset the consequences of inadequate management. It is vital to guard against usurping management’s role or crippling able management. It is the level of managerial leadership, its eagerness to venture, to take risks and seek rewards that will decide the future of both individual business and the economy as a whole. In this relationship, the board should act as guide and mentor to management.
Three basic principles that should guide the board are:
• To effectively select and monitor senior management, directors must be independent of management.
• The board must actively participate in developing long-term strategy and financial goals, but it should not become too involved in detail
• The CEO and his corporate executives should work under the authority of the board.
Even if you are not the owner of a company but a board member, you have certain duties. An experienced Herriman Utah corporate lawyer can explain these duties to you.
Family owned companies
When companies are small and controlled by the founders or when the main shareholder is also the CEO, there is little doubt about how a board director is chosen. This situation gradually changes as the company grows, as other shareholders come in, and when the company goes public. At this point, shareholders other than the original ones become interested parties and have a say in the choice of directors. Later, when the equity begins splitting into very small portions and the number of small shareholders rises to many thousands, individuals lose their power to influence the annual general meeting or to choose the directors. The choice, then, almost by default, returns to the CEO. Alone, or with the support of an influential board member, he or she fills the vacancies mat have occurred. Speak to an experienced Herriman Utah corporate lawyer to ensure that your company does not violate any laws when selecting a new CEO for the business.
As your company grows, corporate governance will begin to play an ever increasing role. Corporate governance, as a term, has come to imply good, in the non-moral as well as the moral sense. Speak to an experienced Herriman Utah corporate lawyer to know more about corporate governance.
During the 1990s the term corporate governance became a household name, not only in the business and financial communities, but also with the public at large. Like so many other new ideas, trends and fads, corporate governance originated in California. Starting in California it has become more than just an American phenomenon. It has spread all over the world – especially since the mid-nineties.
Since corporate governance was initially developed and implemented in the USA and then passed to the United Kingdom, the English term of what from the beginning was an Anglo-American phenomenon has also been accepted in its international proliferation. Another important aspect of corporate governance is how it is organised. As the term indicates it is about governance of corporations but it does not explicitly say anything about who should govern.
Corporate governance is something more than sitting around a boardroom table debating grave matters in measured tones. The board cannot run the company, but that doesn’t mean that the role of the directors should be belittled. Their major challenge is how they perform when the company, or a segment of it, is about to go sour or is already in difficulty. Even in normal conditions the director has an important role to play. When there is a crisis, the most effective director is the one who has the curiosity and confidence to ask tough, possibly embarrassing questions. He rejects glib replies and insists on full, well-argued answers. Such a director can avoid mistakes and become a well-informed, responsible observer and a constructive critic of corporate policies, strategies, procedures, and governance plans. Tough queries are helpful when posed in a positive vein.
It is also possible to question corporate officers firmly without antagonizing them if it is done courteously and respectfully. Care should be taken, however, to avoid pitfalls such as becoming:
1. the adversarial director, contentious and negative;
2. the contrarian director, suspicious and pessimistic;
3. the nit-picking director; or
4. the “do nothing” director who rarely contributes to the proceedings but meticulously collects his fees.
When directors show empathy for the company’s senior officers and maintain a keen curiosity about corporate affairs, the odds are that their contribution to governance will be effective and appreciated.
It is the primary job of the board to replace the chief executive officer with his successor when that is necessary. A wise, open-minded board often identifies a brilliant candidate; it is rare that a mediocre board does better than choose a mediocre CEO. As many directors serve longer than most CEOs, they participate at least once in such a selection. It is often noted that the choice of the next CEO is probably the single most important decision the average director makes, but most come to the board with little or no training for this responsibility. Few boards have members with sufficiently strong judgment and interpersonal skills to choose an outstanding leader. The process of selecting a CEO challenges the board to be a cohesive, efficient unit, with outstanding powers of judgment. Because these qualities are so rare, it is no wonder that boards usually make the safe, rather than the inspired, choice. Then it usually takes a long time for the board to realize that the new CEO is turning out to be unimpressive. Some boards never discover it.
Most mature industries, utilities, banks, or, for that matter, large service groups operate in a staid, uneventful environment. If they succeed in keeping out of trouble and stick to what they know, their CEOs will complete their term of office, perhaps with little glory but also untainted by crisis, debacle, or embarrassment. In a role resembling that of dependable duty officers, they try to prevent upsets, and at best they help improve the position of their company moderately. Soon after they retire, their influence dissipates and they are forgotten. Of course, this is not the scenario in all companies.
In rapid-growth companies or those operating in a volatile climate, the challenges CEOs face are much greater, and they have more opportunity to prove their worth. Quite often in such corporations, the quality of the directors is also more impressive and the risks of office are correspondingly greater. Boards should prepare themselves for the inevitable task of replacing the CEO. One recommended step is to conduct formal annual CEO evaluations, involving all outside directors. If done diligently and in depth, the results will not only highlight the current CEO’s strengths and weaknesses but also give the board invaluable information that will guide them when they begin a search for his replacement. Beyond this basic preparation, there are a number of do’s and don’t’s that every board should consider when it comes to selecting the next CEO:
• Define the needed skills and experience and prioritize them. It is almost impossible to find a candidate with all the desired qualities.
• Look as far afield as necessary to find candidates with imagination, character, and a gleam in the eye, rather than settling for the solid, duller candidate close to home.
• Do not be misled by show and bravura. Ask searching questions and seek the clarity of thought so imperative in an emergency.
• Conclude the search only when the finalists have been subjected to a full due diligence review—a necessary step to avoid most irreversible mistakes.
In other words, the board should see itself as a search committee and prepare a plan of action by taking the following steps:
• Prepare a mission statement.
• Define performance criteria: What will be expected of the new CEO? How will the board assess the success of its choice?
• Scrutinize the board itself to see whether it includes a suitable person with knowledge of the company.
• Establish accountability. It will be more effective if not more than three outside directors act as the actual search committee. Their short list should be brought to the full board for consideration and decision.
• Call for help when time limitations or lack of contacts prevent the board from finding the right candidate. Any outside executive search firm should be given a clear statement of its mission.
• Be flexible—for example, some excellent potential can be found among younger, not yet fully tested, executives. Older candidates are often solid and dependable but have a chip on their shoulder or carry baggage that could be an impediment to excellence.
• Vet any serious candidate carefully. The board not to be impatient when it believes it has found the right candidate. The members should make every effort to understand his or her thought processes and value system, using tests if necessary.
• Make sure the candidate understands the company.
• Make sure there is good chemistry and compatibility between the chosen candidate and the board.
• And, after all the above is done, intuition can prove to be crucial.
The above are a set of general guidelines; obviously, each board will have its priorities. The board members must remember how crucial their choice will be to the company’s future and invest all their talents accordingly. An experienced Herriman Utah corporate lawyer can prove to be an invaluable source of assistance when it comes to assisting the board choose a CEO for the business.
Just as every social structure has its own accountability system, in the classic market economy a company is held responsible in the marketplace. In the same vein, corporate governance is based on the premise that corporate officers operate best when they are held to account for what they do. Today, business activities are growing continuously in range, diversity, and magnitude. When management assumes operating responsibility for production, thereby overseeing the money of other (often anonymous) people, it must accept being measured by yardsticks designed to indicate performance.
An important consequent obligation of corporate governance is to provide information that enables the company’s shareholders to verify that the capital they have entrusted to their agents – the corporate management is, indeed, well looked after. Society at large, through establishment of regulatory procedures and business standards, has over the years created a set of tools for proper corporate governance. Some of these instruments can be used to hold management, directors, auditors and, for that matter, regulators, accountable to the principals and the public in accordance with the terms they accepted when they assumed their responsibilities.
Don’t let the regulations come in the way of the growth and good governance of your company. Seek the assistance of an experienced Herriman Utah corporate lawyer. Remember seeking the assistance of an experienced Herriman Utah corporate lawyer is cheaper than the alternative – hefty fines for lack of corporate governance.
Herriman Utah Business Lawyer Free Consultation
When you need legal help with your business in Herriman, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506