{"id":4917,"date":"2016-04-04T10:47:49","date_gmt":"2016-04-04T15:47:49","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/incorporation-and-legal-structures\/why-directors-must-dissent-from-objectionable-board-decisions.html"},"modified":"2025-10-27T16:08:00","modified_gmt":"2025-10-27T21:08:00","slug":"why-directors-must-dissent-from-objectionable-board-decisions","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/incorporation-and-legal-structures\/why-directors-must-dissent-from-objectionable-board-decisions.html","title":{"rendered":"Why Directors Must Dissent From Objectionable Board Decisions"},"content":{"rendered":"\n
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Why Directors Must Dissent From Objectionable Board Decisions<\/h1>\n\n
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\n By Jade Yeban, Esq.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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A corporate director is elected to oversee the governance of a corporation. They have a fiduciary duty<\/span> to act in the best interests of the company<\/span> and its shareholders. They must also dissent when the company is proposing actions that are illegal or harmful to the company.<\/p>\n\n <\/div>\n\n\n\n

Corporations are a popular business entity because they provide the owners with protection from personal liability for corporate debts and obligations. However, in limited cases,\u00a0members of a corporation<\/a> can be held liable for corporate acts or debts.<\/p>\n

From\u00a0small companies<\/a>\u00a0to large corporations<\/a>, the decisions made by the company\u2019s board can\u00a0impact the business\u2019s success. Directors, as key members of the board<\/span>, have a significant role in these decisions. Their choices can affect business owners and stakeholders<\/span>. They can also set the course of the company\u2019s future.<\/p>\n

This article explores why it\u2019s crucial for directors to dissent from objectionable board decisions<\/span>. Understanding this is important for everyone involved in a business. Entrepreneurs, senior management, and even family members who might be part of the business structure should be aware.<\/p>\n

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What Role Do Directors Play in a Corporation?<\/h2>\n

The typical\u00a0corporate structure<\/a>\u00a0includes directors, officers, and shareholders. Whether it\u2019s a small business or a large public company,\u00a0directors\u00a0have a critical role in shaping the business\u2019s future. They are part of the company\u2019s board, responsible for strategic planning<\/span> and major business decisions. This includes everything from approving business plans to overseeing corporate governance<\/span>.<\/p>\n

Directors may include corporate officers like the CEO and CFO. These directors are chosen to represent the interests of the company<\/span> and its stakeholders<\/span>. Directors do not make day-to-day decisions, but instead appoint\u00a0officers. These officers oversee and handle the day-to-day operations of a business. They attend regular board meetings<\/span> and contribute to annual meetings. They are involved in decision-making<\/span> processes.\u00a0<\/p>\n

In both private companies and public companies, directors\u2019 contributions are essential. They help align the business needs with the company\u2019s long-term goals.<\/p>\n

Directors are generally protected from being held\u00a0liable\u00a0at a personal level. This means they are not responsible for the corporation\u2019s debts and legal judgments, but there are instances when they can be held liable for corporate actions<\/span>. If the board of directors<\/span> makes\u00a0an illegal or objectionable decision, there is a way for directors to protect themselves from liability by\u00a0dissenting\u00a0from the board\u2019s decision<\/span>.<\/p>\n

Reasons Directors Should Dissent<\/h2>\n

Board members should not automatically rubber stamp<\/span> decisions by the executive team. Directors have a legal responsibility to act in the best interests of the company<\/span> and its shareholders. They also have a fiduciary duty<\/span> which\u00a0requires them to dissent from certain board decisions<\/span> if harmful or illegal. This is\u00a0true when these decisions conflict with the company\u2019s interests. Reasons for a dissenting view<\/span> can include:<\/p>\n