Southwest Chinese Journal (Houston, Tex.), Vol. 2, No. 11, Ed. 1 Tuesday, November 1, 1977 Page: 10 of 16
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I"? lij H'-'f ^ Southwest Chinese Journal NOVEMBER 1, 1977
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* ASSISSTANT MANAGERS
* MANAGER TRAINEES
* DEPARTMENT SUPERVISORS
EXPERIENCE HELP BUT NOT NECESSARY
GOOD SALARY AND BENEFITS
UNLIMITED OPPORTUNITY FOR GROWTH
HEAD CASHIERS & CHECKERS ALSO NEEDED
--- FULL TIME OR PART TIME-'
Please apply in person
(male or female) at
180 Town & Country
Call H06ERT JOE for appointment —464-0209
THE CORPORATION (Cont'd.)
Our previous two articles have concerned both the legal nature of corporations and
the formalities required to form a corporation under the laws of the State of Texas.
Although this series of articles can not be considered an indepth study of the
corporation as a form of business entity, a brief discussion of the duties of
corporate directors, officers and controlling shareholders is in order particularly in
light of recent events involving the former Cabinet Member, Bert Lance.
The relationship between a corporation and its director is unique and requires a
high degree of loyalty on the part of the director. Traditionally the basic
relationship between a corporation and its directors, officers and agents has been
governed and established by common law decisions rather than by statutory
provisions. Under the common law the duties owed to corporations by its officers
and directors can be classified into two broad catagories:
(1) A duty to exercise due care in conducting the corporation's
(2) A duty of loyalty which would preclude self dealing, particularly
at the expense of the business.
Under the Iexas Business Corporation Act, as well as an increasing number of
Federal statutes, directors and officers of companies are under increased scrutiny
and exposure to liability for specific acts.
F or example, a director is liable to the corporation for losses incurred as a result of
his or her failure to exercise the proper care in the management of corporate
affairs. It has often been stated that the test to determine what is proper care is
that the duties must be discharged "in good faith and with the degree of diligence,
care and skill which ordinarily prudent men would exercise under similar
circumstances in like positions." There is literally a wealth of litigation which
involves the application of this test to various situations. Most cases were liability
has been found generally involve elements of self-dealing, negligence or
misjudgments. Of course liability for mismanagement may be imposed upon
directors and officers of a corporation when they fail to take action as well. This
duty of due care has in certain instances extended beyond a duty owed to the
corporation. For example, there is language in early Texas cases that directors of
banks owe a particularly strong duty of care and prudence to the general public.
The second broad category of duties owed to by its officers and directors is the
duty of loyalty. This particular area has produced many more times the amount of
litigation between parties than the duty of care which we discussed above,
i ienerally, these type of cases involve some form of self-dealing. For example, it
may be transactions between a director and his corporation, cases involving
transactions between corportions with common directors and/or cases involving a
director taking advantage of an opportunity which may belong to the corporation.
In our next article we will continue to discuss the duty of loyalty owed corporations
by its directors and officers and hopefully illustrate how this subject area can be of
importance to you as a director or officer of a corporation large or small.
Attorney at Law
84 5 3 HOWARD DR.-- HOUSTON, TX. 77017
* BALLET - JAZZ - TAP - PIANO *
CHINESE & ORIENTAL DANCE
SHIRLEY GAO LEE, artistic director
Sptclal f pr fnlolhr
K&Aff • £9HKM
METROPOLITAN LIFI INIURAKCI COMPANY
Officii 3100 Timmons LANK SUITI 902 Houiton TX 7702? I
.aaa UM. ,a«AAi
Commercial Industrial I*ersonal
erbert Culp, Prr .
¥ w a m
A S I t
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Bob Christian, Vicr-Pres.
4445 N. Braeswood
Tel. (713) 661-0000
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Southwest Chinese Journal (Houston, Tex.), Vol. 2, No. 11, Ed. 1 Tuesday, November 1, 1977, newspaper, November 1, 1977; Houston, Texas. (texashistory.unt.edu/ark:/67531/metapth273741/m1/10/: accessed June 22, 2017), University of North Texas Libraries, The Portal to Texas History, texashistory.unt.edu; crediting Rice University Woodson Research Center.