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Show April 1972 Page 3 Utah Farm Bureau News insurance Companies Hold Meetings Country Mutual Life and Utah Farm Bureau Insurance comheld panies meetings March 15 in the board room at the Utah Farm Bureau office. One new director was elected to the board of Country Mutual Life. Gerald Johnson, Aurora is currently a member of the Utah Farm of Bureau Board Directors. Mr. Johnson is In Lots of 5 Bags Receive s2sabag Discount On associated with Johnson Livestock Co., a family owned corporation doing cattle, sheep and otter farm enterprise operations. Mr. Johnson replaces Rulon Smoot, president of South Box Elder County on the board. J. Ray Garrett, treasurer announced the completion of a very successful year in life insurance business, the test experienced by Farm Bureau affiliated company to date. Utah Farm Bureau Insurance Company made an outstanding record during 1971 as wdl. The company readied a new milestone in premium income, topping the $2,000,000 premium income level. Dealing with conditions that have caused an element of concern to the casualty insurance industry because of excessive losses UFBIC has made a commendable record. In spite of high loss ratios that have been considered difficult to operate with the company continued to pay out benefits to members and continue to improve the financial condition of the company. At Your IFA Your Need To Know Responsibilities And Liabilities Of Directors FARM PRESS PRESENTS My SIDE OFTMe CASE AND HELPSTQ IMPROVE Ol)R IMAGE, THE Allen Lauterbach (Editors Note: Mr. Lauterbach is General Counsel, American Farm Bureau Federation, Chicago.) YOUR NEED TO KNOW There is developing a greater awareness of the need for a better understanding of the roles and responsibilities of the various persons involved in the management process. Many organizations are conducting management training schools for directors, officers, and executive personnel. Failure by persons having management responsibility to recognize their proper roles and responsibilities will inevitably lead to disunity of purpose and will stymie the growth and success of the organization. The subject is one which is receiving more and more attention by farmer cooperatives and farm organizations as they expand their operations beyond county and state boundaries, even becoming international in scope. Boards of directors are becoming more concerned about how they can be more effective in carrying out their responsibilities in an economic and political climate which is constantly changing in the United States - and throughout the world. They are aware that the board, being entrusted with the direction of management, is ultimately responsible for the continued success of the corporation. In general, the rules and principles on this subject, except as modified by statute, are as applicable to a cooperative association as to a corporation organized under the general business corporation laws of a state. It might be well to consider the legal characteristics of a corporation. In the classic case of The Trustees of Dartmouth College v. Woodward (1819), 4 Wheat. 518, Chief Justice Marshall stated. By I J SEND SUBSCRIPTIONS Ti TO CITY COUSINS FOR ONLY MEMBERS ONLY! M.E. Carroll Reports To Policyholders hardpan - Dealer Plants. FARE! BUREAU PAPER RECIPES V- All Varieties of Northrup King Seed SOMC AOVIRTISERf CONTEND THAT A FARM PAPER'S CITY, CIRCULATION IS OEAO WEIGHT. WELL, WHO OOTHEY THINK BUYS THE GROCERIES? URBAN LADIES LOVE FARM, ' or More, A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly, or as incidental to its very existence. These are such as are supposed best calculated to effect the object for which it was created . . . They enable a corporation to manage its own affairs, and to hold property without the perplexing intricacies, the hazardous and endless necessity, of perpetual conveyances for the purpose of transmitting it from hand to hand By these means, a perpetual succession of individuals are capable of acting for the promotion of the particular object, like one immortal being. except for those powers specifically conferred on me shareholders or members. Powers to dispose of, or discontinue, the business of a corporation, merger, consolidate or modify its basic structure, as fixed in its charter, are customarily reserved to the shareholders or the members. BOARD RESPONSIBLE FOR MANAGEMENT Most state laws provide that the board has the responsibility for the management of the corporation. For example, the Agricultural Cooperative Act of Illinois (1923) provides, The affairs of the association shall be managed by a board of not less than five directors . . . The General Corporation Law of Delaware reads as follows: The business of every corporation organized under the provisions of this Chapter shall be managed by a Board of Directors. The legal requirement that a corporation shall be managed by a board of directors does not mean that the board must make the y operating decisions. The charter and bylaws usually authorize the board to delegate to duly appointed officers, employees, and agents certain powers and duties connected with the management of the corporation, subject to control of the board. Courts have held that a board may delegate to agents of their own appointment the performance of any acts which they themselves can perform. The delegation of such powers is generally confined to those activities which are in the usual and ordinary course of the business. The authority for day-to-da- their acts is always found in the board. Any delegation of authority which would divert the directors of control is not permissible. Delegation of powers has teen upheld by the courts where such delegation covered ministerial, current, ordinary and routine powers, but not powers to inaugurate radical reversals of or departures from fundamental policies and methods of conducting the business a:-- prescribed by the board. BOARD CANNOT ABDICATE OR SURRENDER ITS POWERS In a New York case the court stated that the rule is wdl settled by authority and sustained by sound principle that a board of directors cannot confer upon otters the power to discharge duties imposed upon them which involve the exercise of judgment and discretion, except in the transaction of the ordinary business of the corporation, unless authorized to do so by charter. In other words, the board may not abdicate or surrender its power to direct the management of the corporation. For this reason any delegation by a board of its powers is always subject to revocation, at its will and without cause. PRINCIPAL DUTIES OF BOARD Some of the principal duties and legal responsibilities of a board of directors are as follows: 1. The board shall determine the general objectives and policies of broad significance to the association, within the framework of its charter, bylaws and any over-a- ll policies established by the membership. The board should endeavor to anticipate future needs of the members and to explore the economic feasibility of serving these needs through the association. 2. The board shall elect or appoint such officers, employees, and agents as authorized by the bylaws. It is the common practice for a board to appoint a chief executive and delegate to him and his staff the responsibility for the business operations of the corporation. This chief executive is recognizeid as the administrator or manager of the corporation. In some cases, the administrator is a management corporation The board has the duty, as a fiduciary, to protect and control the corporate assets and to maintain the solvency of the corporation through the adoption of sound fiscal policies. It cannot avoid this responsibility through delegation. In this connection, the board has responsibilities to supervise the deposit or investment of corporate funds; authorize persons to sign checks and borrow money; secure adequate fidelity bonds and insurance; adopt a budget; authorize the distribution of stock dividends and patronage dividends; appoint an independent auditing firm to make a detailed audit, at least annually, of the financial condition of the association; and exercise other fiscal controls. 3. board should establish such management policies as may be needed by the administrator (manager) and his staff as a guide in carrying out their responsibilities. These policies may be formally determined by the board, or they may result from decisions of the administrator which are confirmed by the board. 4. The 5. The board should control executive compensation and retirement policies. It should review regularly salary scales of key management personnel and compare them with salaries of similar personnel in other companies to be sure that the association maintains qualified personnel. The board should, if possible, make certain that able, young executives are developed within the association so that there is some depth in key personnel. The board shall require progress and financial reports from those to whom responsibilities have been delegated to ascertain whether or not policies are being carried out and the desired results are being achieved. 6. The board has the responsibility to review and appraise the service activities and programs of the association with sufficient regularity to assure that they contribute to over-a- ll goals and objectives of the association. 7. (See Page 4, Col. 1) |