Can shareholders remove directors for cause or without cause, and who authorizes removal without cause?

Can shareholders remove directors for cause or without cause, and who authorizes removal without cause?

• A. Shareholders may remove for cause; Without cause only if charter/bylaws authorize
• B. Directors may remove themselves
• C. Shareholders may remove without cause regardless
• D. Only the CEO may remove directors

Answer: (A)

The key idea is who has the power to change the board and under what conditions. Shareholders have the power to remove directors, but the ability to remove without cause is not automatic. Removing a director for cause is generally permitted by the shareholders, but removing a director without cause requires explicit authorization in the company’s charter or bylaws. If the charter or bylaws don’t authorize removal without cause, shareholders can remove a director only for cause. That’s why the correct choice states that shareholders may remove for cause, and without cause only if the charter/bylaws authorize. The CEO does not have authority to remove directors, and directors don’t normally remove themselves as the default rule.

The key idea is who has the power to change the board and under what conditions. Shareholders have the power to remove directors, but the ability to remove without cause is not automatic. Removing a director for cause is generally permitted by the shareholders, but removing a director without cause requires explicit authorization in the company’s charter or bylaws. If the charter or bylaws don’t authorize removal without cause, shareholders can remove a director only for cause. That’s why the correct choice states that shareholders may remove for cause, and without cause only if the charter/bylaws authorize. The CEO does not have authority to remove directors, and directors don’t normally remove themselves as the default rule.