Are there any federal laws or regulations that REQUIRE leaders (i.e.,
CEOs) of publicly held corporations to perform their duties in the
best interest or its stockholders?

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Request for Question Clarification by pafalafa-ga on 04 Apr 2006 14:36 PDT

Jerry,

Closest, as far as federal law goes, is probably the Sarbanes-Oxley
act, which was passed in the wake of the financial accounting scandals
of the past few years.

You can read a bit about it here:


http://www.aicpa.org/info/sarbanes_oxley_summary.htm


and pay particular attention to Section 302:

Section 302: Corporate Responsibility For Financial Reports.

The CEO and CFO of each issuer shall prepare a statement to accompany
the audit report to certify the "appropriateness of the financial
statements and disclosures contained in the periodic report, and that
those financial statements and disclosures fairly present, in all
material respects, the operations and financial condition of the
issuer." A violation of this section must be knowing and intentional
to give rise to liability.




Is this the sort of federal law you had in mind?


pafalafa-ga

Look to state law for the duties that officers owe to stockholders.

Look to federal law for reporting and antifraud provisions.

Quite right, companies are incorporated under state law, an
overwhelming large number in Delaware.
Here is the section from Delaware law on corporate directors and officers:
http://www.delcode.state.de.us/title8/c001/sc04/index.htm#TopOfPage

You don't need to read it all, because the law tells what the persons must do,
but not not how they should behave or run their business.  It often
refers to the  company's bylaws as a source for what the company and
directors and officers may do.  For example:
"(b) Officers shall be chosen in such manner and shall hold their
offices for such terms as are prescribed by the bylaws or determined
by the board of directors or other governing body. Each officer shall
hold office until such officer's successor is elected and qualified or
until such officer's earlier resignation or removal. Any officer may
resign at any time upon written notice to the corporation."

It is clear in principle that the directors are the representatives of
the shareholders and oversee management.  Thus, they should assure
that management (CEO and officers, whom they appoint and can remove)
also act in the interests of the shareholders.

But I don't believe that this is stated in this law or those of other states. 
The law goes on the principle that the shareholders' ability to
elect/choose the directors gives them the control that the directors
will act in the interest of the shareholders, also as to controlling
that the CEO and other officers do so.

All the talk about governance in recent years reflects on the
weaknesses of this principle, something many want to have put into
law.