Key Elements of Corporate Governance in the USA

The US does not have a singular, comprehensive act like the UK’s Companies Act 2006. Instead, corporate governance and board meeting governance, is regulated through a combination of state laws, federal regulations, and corporate bylaws.

Corporate Governance in the United States

State Corporate Laws

    • Delaware General Corporation Law (DGCL): Delaware is a significant jurisdiction for corporate law in the U.S., with many companies choosing to incorporate there due to its well-developed legal framework and business-friendly environment. The DGCL is a primary source of corporate governance rules, including those for board meetings.
    • Model Business Corporation Act (MBCA): Used by many states as a template for their own corporate laws, the MBCA provides guidelines on various governance matters, including board meetings. Each state adapts and enacts its version of these laws.

Federal Regulations

    • Securities Exchange Act of 1934: Overseen by the Securities and Exchange Commission (SEC), this act regulates public companies, focusing on disclosure requirements and financial reporting, indirectly affecting board governance.
    • Sarbanes-Oxley Act of 2002: This federal law imposes stringent record-keeping and financial transparency requirements on public companies, significantly impacting board governance practices.

Corporate Bylaws and Charters

    • Each corporation has its own bylaws and charter, which set specific rules for board meetings, including notice, quorum requirements, voting procedures, and other governance practices. These documents must comply with the applicable state laws.

Key Points on Board Meeting Governance:

      1. Notice and Agenda Requirements

        • State laws and corporate bylaws typically require advance notice of board meetings. The specifics, including how far in advance notice must be given and what details must be included in the agenda, vary by jurisdiction and company.

      2. Quorum and Voting

        • Quorum requirements (the minimum number of directors required to hold a meeting) and voting procedures are governed by state laws and corporate bylaws. These rules ensure that decisions are made with adequate representation and consensus among directors.

      3. Board Meeting Minutes

        • Accurate minutes must be maintained to document the decisions and discussions during board meetings. These records are crucial for legal compliance and transparency.

      4. Director Responsibilities and Fiduciary Duties

        • Directors in the US are bound by fiduciary duties of care and loyalty, requiring them to act in the best interests of the corporation and its shareholders. These duties influence how directors conduct themselves during board meetings and make decisions.

      5. Remote Participation

        • Many states allow for remote participation in board meetings through teleconferencing or other electronic means, provided that all participants can communicate effectively.

Summary of Governance Structures and Their Impact:

    1. State-Level Governance

      • The primary governance rules for corporate board meetings are set at the state level. Each state has its own set of corporate laws, and companies must adhere to the regulations of the state in which they are incorporated. Delaware, with its DGCL, is the most influential state in this regard.

    2. Federal Influence

      • While there is no overarching federal law equivalent to the UK’s Companies Act 2006, federal regulations such as the Securities Exchange Act and the Sarbanes-Oxley Act play significant roles in shaping corporate governance practices, especially for public companies.

    3. Corporate Bylaws and Internal Policies

      • Beyond state and federal regulations, each corporation's bylaws and internal governance policies provide the detailed rules for conducting board meetings and managing corporate affairs.