Although most board members of publicly traded companies are paid an annual salary, plus a bonus based on performance (usually in the form of company stock), being on the board of a company or organization tends to be a part-time job and most members have day jobs in addition to their position on the board.
But because board members bear a fiduciary responsibility to look after the financial interests of the company’s investors, they have to be very careful where they get the rest of their income. Accept some money or do a favor for someone from the wrong company, and you raise suspicions that you might have a conflict of interests.
Alan Kahn, an investor in United Flexible, Inc., an aerospace parts manufacturer and an affiliate of Arlington Capital Partners, filed a lawsuit in Delaware against two of Kreisler Manufacturing Corp.’s board members for allegedly conducting a merger in bad faith. According to the lawsuit, the two board members, Edward Stern and his brother Michael, received side deals from Arlington just before the board decided to drop its asking price for the company.
The lawsuit further alleges board members deliberately failed to disclose important information from shareholders regarding the merger. As evidence, Kahn’s complaint points to the fact that the board members refused to make copies of the merger agreement, requiring instead that all shareholders who wanted any information about the details about the agreement needed to be willing to fly to Philadelphia to see a physical copy of the contract. Continue reading