‘ITLEIII - BOARD OF DIRECTORS/TRUSTEES AND OFFICERS faa annual meeting, the members may be represented by their respective proxies.1? SEC. 29. Compensation of Directors or Trustees. - In the absence of any provision in the bylaws fixing their compensation, the directors or trustees shall not receive any compensation in their capacity as such, except for reasonable per diems: Provided, however, That the stockholders representing at least a majority of the outstanding capital stock or majority of the members may grant directors or trustees with compensation and approve the amount thereof at a regular or special meeting. Inno case shall the total yearly compensation of directors exceed ten percent (10%) of the net income before income tax of the corporation during the preceding year. Directors or trustees shall not participate in the determination of their own per diems or compensation. Corporations vested with public interest shall submit to their shareholders and the Commission, an annual report of the total compensation of each of their directors or trustees. Note: The provision on compensation of directors does not include corporate officers who are not directors. General rule: Directors or Trustees shall not receive any compensation, as such directors or trustees, except for reasonable per diems. Exception: 1. When itis fixed by the corporation's by-laws; and 2 When the stockholders, representing at least a majority of the outstanding capital stock, or majority of the members, vote to grant the same. In construing the said provision, it bears stressing that the directors ofacorporation shall not receive any compensation for being members of the ble per diems, The two instances where board of directors, except for reasonal the directors are to be entitled to compensation shall be when it is fixed by the corporation’s by-laws or when the stockholders, representing at least ‘ @ majority of the outstanding capital stock, vote to grant the same at a — ‘Pau Le Tan etal vs Paul Sytp and Meritt Lim, GR_ No. 153468, August 17,2006, 269 EEETITLE Ill - BOARD OF DIRECTORS/TRUSTEES AND OFFICERS, 4 regular or special stockholder’s meeting, subject to the qualification = any of the two situations, the total yearly compensation of directors, 3 ae directors, shall in no case exceed ten (10%) percent of the net income bar: income tax of the corporation during the preceding year.2° ad ‘There is no argument that directors or trustees, as the case ma are not entitled to salary or other compensation when they perform Nothing more than the usual and ordinary duties of their office. This rule is foun upon a presumption that directors/trustees render service gratuitous), and that the return upon their shares adequately furnishes the motives jy service, without compensation. Under the foregoing section, there are only? ways by which members of the board can be granted compensation apa, from reasonable per diems: 1. When there is provision in the by-laws fixing their compensation; ang 2. When the stockholders representing a majority of the outstanding capital stock at a regular or special stockholders’ meeting agree to give ito them2t Problem: X,Y, and Z, are the controlling members of the Board of Trustees of W Corp, a stock corporation engaged in the operation of an educational fnstitution. According to A, B, and C, the minority stockholders of W Corp., sometime on June 1, 1986 in the principal office of W Corp., a Special Board Meeting was held. Prior to aforesaid Special Board Meeting, copies of notice thereof, were distributed to all Board Members. The notice allegedly indicated that the meeting to be held on June 1, 1986 included Item No. 6 which states: Possible implementation of Art. Ill, Sec. 6 of the Amended By-Laws of W Corp. on compensation of al officers of the corporation. In said meeting, the Board of Trustees passed Resolution No. 48, s. 1986, granting monthly compensation to X, Y, and Z as corporate officers retroactive June 1, 1985, On March 13, 1991, A, B, and C filed an affidavit-complaint against X, Y, and Z for falsification of a public document. The charge fot falsification of public document was anchored on X, ¥ and Z's submission of W Corp’'s income statement for the fiscal year 1985-1986 with the SEC reflecting therein the disbursement of corporate funds for compensation of X, Y, and Z based on Resolution No. 48, series of 19! making it appear that the same was passed by the board on March 30 1986, when in truth, the same was actually passed on June 1, 1986.24" | not covered by the corporation's fiscal year 1985-1986 (beginning MY | > Gabriel C.Singson etl. vs, Commission On Aud i CRN. 131 Western institute of Technology, Inc, etal ve Re 159355, August 9, 2010. Seo Sala tal, No 113032, ngs 211997 0 —_d= ‘qITLE Ill - BOARD OF DIRECTORS/TRUSTEES AND OFFICERS 1985 and ending Apri x ne ee 30, 1986). Are X, Y, and Z entitled to Answer: This proscription, however, directors /trustees of a corporation is is the clear phraseology of Section states: “xx The directors shall not directors, xxx." The phrase as such against granting compensation to nota sweeping rule. Worthy of note 30 (Old Corporation Code) which t receive any compensation, as such ‘ x directors is not without significance for it delimits the scope of the prohibition to compensation given to them. for services performed purely in their capacity as directors or trustees. The unambiguous implication is that members of the board may receive compensation, in addition to reasonable per diems, when they render services to the corporation in a capacity other than as directors/trustees. In the case at bench, Resolution No. 48, s. 1986 granted monthly compensation to X, Y, and Z not in their capacity as members of the board, but rather as officers of the corporation, more particularly as Chairman, Vice-Chairman, Treasurer and Secretary of W rp. Clearly, therefore, the prohibition with respect to granting ‘compensation to corporate directors/trustees as such under Section 30 is not violated in this particular case. Consequently, the last sentence of Section 30 (Now Section 29, Revised Corporation Code) which provides: ssses+, Inno case shall the total yearly compensation of directors, as such directors, exceed ten percent (10%) of the net income before income tax of the corporation during the preceding year does not likewise find application in this case since the compensation is being given to X, Y, and Z in their capacity as officers of W Corp.’s and not as board members? Limitation on compensation Tn no case shall the total yearly compensation of directors, as such directors, exceed 10% of the net income before income tax of the corporation during the preceding year. Note: Directors or trustees shall not participate in the determination of their own er diems or compensation. Salay etal, GB. No. 113082, August 2, 1997, Western Inc, eval. vs Ricardo. Institute of Technology, a1‘TITLE III - BOARD OF DIRECTORS/TRUSTEES AND OFFICERS Note: interest shall submit to their sharehoy cd with public i Coenen ves mual report of the total compensation of each oF thee eit and the Commission, an annual report of | directors or trustees. SEC. 30. Liability of Directors, Trustees or Officers. ~ Director, or trustees who willfully and knowingly vote for or assent to Patent) unlawful acts of the corporation or who are guilty of gross negligence g bad faith in directing the affairs of the corporation or acquire any, personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders 9, members and other persons. A Director, Trustee or Officer shall not attempt to acquire, or acquire any interest adverse to the corporation in respect of any matter which has been reposed in them in confidence, and upon which, equity imposes a disability upon themselves to deal in their own behalf otherwise, the said director, trustee or officer shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation. Doctrine of corporate opportunity Section 31 (Now Section 30, Revised Corporation Code) lays down the “doctrine of corporate opportunity" and holds personally liable corporate directors found guilty of gross negligence or bad faith in directing the affairs of the corporation, which results in damage or injury to the corporation, its stockholders or members, and other persons. Bad faith implies breach of faith and willful failure to respond to plain and well understood obligation. It does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty through some ‘motive or interest or ill will. It partakes of the nature of fraud. Gross negligence, on the other hand, is the want of even slight ca"® acting or omitting to act in a situation where there is duty to act Nat inadvertently but willfully and intentionally, with a conscious indifference consequences insofar as other persons may be affected. It evinces a thoughtles: disregard of consequences without exerting any effort to avoid them; the watt or absence of or failure to exercise slight care or diligence, or the entire abse" of care.23 ‘Manuel Luis Sanchez vs. Republi of the Philippines, GR No, 172885, ctober 9, 2008. 272qiTLE III - BOARD OF DIRECTORS/TRUSTEES AND OFFICERS les when solidary lability attach to the directors, officers or employees Its basic that a corporation is a juridical entity with legal personality arate and distinct from those acting for and in its behalf and, in general, from the people comprising it. The general rule is that obligations incurred by the corporation, acting through its directors, officers and employees, are its sole abilities, and vice versa. There are times, however, when solidary liabilities may be incurred and the veil of corporate fiction may be pierced. Exceptional circumstances warranting such disregard of a separate personality are summarized as follows: ‘1. When directors and trustees or, in appropriate case, the officers ofa corporation: (a) vote for or assent to patently unlawful acts of the corporation; ® pon bad faith or with gross negligence in directing the corporate urs; (are guilty of conflict of interest to the prejudice of the corporation, Its stockholders or members, and other persons; 2. When a director or officer has consented to the issuance of watered down ‘stacks or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto; 3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the corporation; or 4, When a director, trustee or officer Is made, by specific provision of law, personally liable for his corporate action. Requisites: Before a director liable for corporate obligations, however, concur: or officer of a corporation can be held personally the following requisites must 1. The complainant must allege in the complaint that the director or officer assented to patently unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad faith; and 2. The complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith. Error in business judgment if the cause of the losses is merely error in business judgment, not amounting to bad faith or negligence, directors and/or officers are not Table For them to be held accountable, the mismanagement and the resulting losses on account thereof are not the only matters to be proven; it is likewise necessary to show that the directors and/or officers acted in bad faith and with malice in doing the assailed acts. Bad faith does not simply ‘connote bad judgment or negligence; it imports a dishonest purpose or some — Lada Magaling eval vs. Peter Ong, CR. No 173333, August 13 2008, 273TITLE IIl - BOARD OF DIRECTORS/TRUSTEES AND OFFICERS breach of a ky quit jous doing of a wrong, a Down 4 through anne nave or nares ‘or il-will partaking of the nature of tity left solely to th, iestions of policy or of management are £0 the hon, decision ot the petal os the business manager of me eae and . court is without authority to substitute its judgment honest '¢ board, ang as long as it acts in good faith and in the exercise of hone judement in interest of the corporation, its orders are not reviewable by the courte 2" SEC. 31. Dealings of Directors, bites or acted With the Corporation. - A contract of the corporation with one (1) or more of tg directors, trustees, officers or their spouses and relatives withiy x fourth civil degree of consanguinity or: affinity is voidable, at the tion of such corporation, unless all the following conditions are present, (@) The presence of such director or trustee in th, meeting in which the contract was approved necessary to constitute a quorum for such meetin, (©) The vote of such director or trustee was not nei the approval of the contract; (©) The contract is fair and reasonable circumstances; (4) In case of corporations vested with public interest material contracts are approved by at least two-thin, (2/3) of the entire membership of the board, with at least & majority of the independent directors voting to approve the material contract; and (6) Im case of an officer, the contract has been previously authorized by the board of directors. re board Was not 3 ‘cessary for under the Where any of the first three (3) conditions set forth in the Preceding paragraph is absent tin the case of a contract with a director Ox trustee, such contract may be ratified by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) ofthe members in a meeting called for the Pi bose: Provided, That full disclosure of the adverse interest of the directors or trustees involved is ‘made at such meeting and the contract is fair and reasonable under th circumstances, ipinas Port Services, Inc. nd Mindanao Termin ane 161886, March 16,2007, inal and Brokerage Services, Inc. x. VictorioS.Go, etal: 274 LhTITLE Ill - BOARD OF DIRECTORS/TRUSTEES AND OFFICERS SELF-DEALING directors or trustees or officers sah eanac of ‘the. corporation with one or more of its directors or es uuses and relatives wi . ee ee within the fourth civil degre General Rule: A contract of the corporation with one or more of its directors or trustees, officers or their spouses and relatives within the fourth civil degree of consanguinity or affinity is voidable, at the option of such corporation. Exceptions: 1. That the presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting; 2, That the vote of such director or trustee was not necessary for the approval of the contract; 3. That the contract is fair and reasonable under the circumstances; 4. Incase of corporations vested with public interest, material contracts are approved by at least two-thirds (2/3) of the entire membership of the board, with at least a majority of the independent directors voting to approve the material contract; and 5. That in case of an officer, the contract has been previously authorized by the board of directors. Problem: Y and X Corp, entered into a dealership agreement whereby Y was obligated to act as the exclusive distributor of X Corp. of its cement products in the entire Mindanao area for a term of 5 years. Right after Y entered into the aforesaid dealership agreement, he placed an advertisement in a newspaper the fact of his being the exclusive dealer of X Corp.'s white cement products in Mindanao area and was even congratulated by his business associates, so much so, he was asked by some of his businessmen friends and close associates if they can be his sub-dealer in the Mindanao area. Relying heavily on the dealership agreement, Y entered into a written agreement with several hardware stores in the Cities of Davao and Cagayan de Oro which would thus enable him to sell his allocation of 20,000 bags regular supply of the said commodity. After Y was assured by his supposed buyer that his allocation of 20,000 bags of white cement can be disposed of, he informed X Corp. that he is making the necessary preparation for the opening of the requisite letter of credit to cover the price of the due initial delivery, looking forward to X Corp.'s duty to comply with the dealership agreement. In reply to the aforesaid letter of Y,X Corp. replied that the board of directors of X Corp. decided to impose some conditions. 275TITLE Ill - BOARD OF DIRECTORS/TRUSTEES AND OFFICERS Several demands to comply with the dealership agreement, i made by ¥ to X Corp, however, X Corp. refused to comply with the same and Y by force of circumstances was constrained to cancel his a, mere for the supply of white cement with third parties, which were Concluded in anticipation of, and pursuant to the said dealership agreement, Notwithstanding that the dealership agreement between ¥ angy Corp. which was in force and subsisting X Corp, in violation of, and wig evident intention not to be bound by the terms and conditions thereor entered into an exclusive dealership agreement with a certain C for ihe marketing of white cement in Mindanao. Is the “dealership agreement" a valid and enforceable contract) Answer: Under the Corporation Code, all corporate powers shall be exercised by the Board of Directors, except as otherwise provided Jaw. Although it cannot completely abdicate its power and responsibilty to act for the juridical entity, the Board may expressly delegate specific powers to its President or any of its officers. In the absence of such express delegation, a contract entered into by its President, on behalf of the corporation, may still bind the corporation if the board should ratify the same expressly or impliedly. Furthermore, even in the absence of express or implied authority by ratification, the President as such may, as a general rule, bind the corporation by a contract in the ordinary course of business, provided the same is reasonable under the circumstances. These rules are basic, but are all general and thus quite flexible. They apply where the President or other officer, purportedly acting for the corporation, is dealing with athird person, ie, a person outside the corporation. The situation is quite different where a director or officer is dealing with his own corporation. In the instant case Y was not an ordinary stockholder; he was a member of the Board of Directors and ‘Auditor of the corporation as well. He was what is often referred to asa “self-dealing” director. A director of a corporation holds a position of trust and as such, he owes a duty of loyalty to his corporation. In case his interests conflict with those of the corporation, he cannot sacrifice the latter to his ow" advantage and benefit. As corporate managers, directors are committed to seek the maximum amount of profits for the corporation. This trust relationship “is not a matter of statutory or technical law. It springs from the fact that directors have the control and guidance of corporate afta and property and hence of the property interests of the stockholders.” !" the case of Gokongwei v. Securities and Exchange Commission, this C quoted with favor from Pepper v, Litton, thus: + He cannot by the intervention of a corporate entity violate the ancient Precept against serving two masters... He cannot utilize his ins 276qITLEIII - BOARD OF DIRECTORS/TRUSTEES AND OFFICERS information and his strategic position for his own preferment. He cannot violate rules of fair play by doing indirectly through the corporation what he could not do directly. He cannot use his power for his personal ‘advantage and to the detriment of the stockholders and creditors no matter how absolute in terms that power may be and no matter how ‘meticulous he is to satisfy technical requirements. For that power is at all times subject to the equitable limitation that it may not be exercised for the aggrandizement, preference, or advantage of the fiduciary to the exclusion or detriment of the cestuis. .. On the other hand, a director's contract with his corporation is not in all instances void or voidable. If the contract is fair and reasonable under the circumstances, it may be ratified by the stockholders provided a full disclosure of his adverse interest is made. Granting arguendo that the “dealership agreement" involved here would be valid and enforceable if entered into with a person other than a director or officer of the corporation, the fact that the other party to the contract was a Director and Auditor of X Corp. changes the whole situation. First of all, the Court believe that the contract was neither fair nor reasonable. The "dealership agreement” entered into was to sell and supply to Y 20,000 bags of white cement per month, for five years, at the fixed price of P9.70 per bag. Y is a businessman himself and must have known, or at least must be presumed to know, that at that time, prices of ‘commodities in general, and white cement in particular, were not stable and were expected to rise. At the time of the contract, X Corp. had not ‘even commenced the manufacture of white cement, the reason why delivery was not to begin until 14 months later, He must have known that within that period of six years, there would be a considerable rise in the price of white cement. No provision was made in the "dealership agreement” to allow for an increase in price mutually acceptable to the parties, Instead, the price was pegged at P9.70 per bag for the whole 5 years of the contract. Fairness on his part as a director of the corporation from whom he was to buy the cement, would require such a provision. In fact, this unfairness in the contract isalso a basis which renders. contract entered into by the President, without authority from the Board of Directors, void or voidable, although it may have been in the ordinary course of business. We believe that the fixed price of P9.70 per bag for a period of 5 years was not fair and reasonable. Y, himself, when he subsequently entered into contracts to resell the cement to his "new dealers" stipulated as follows: ‘ement shall be mutually determined by us but in no case The price of white c per bag (94 Ibs). shall the same be less than P1400 277TITLE Ill - BOARD OF DIRECTORS/TRUSTEES AND OFFICERS A Allof these contracts were entered into soon after his “dearg agreement” with X Corp, and in each one of them he protecteg jp from any increase in the market price of white cement. Why aig y°el protect the corporation in the same manner when he entereq inty wt “dealership agreement"? For that matter, why did the President 3,9 he Chairman of the Board not do so either? As director, specially sing, was the other party in interest, Y's bounden duty was to act jn an manner as not to unduly prejudice the corporation. In the light of @! Circumstances of this case, it is to us quite clear that he was guityy Aisloyalty to the corporation; he was attempting in effect, to enye! himself at the expense of the corporation. There is no showing that i stockholders ratified the “dealership agreement” or that they were jujt aware ofits provisions. The contract was therefore not valid and tn’, Court cannot allow him to reap the fruits of his disloyalty 25 . RATIFICATION by stockholders on self-dealing directors, or trustees, a officers ‘A contract of the corporation with directors or trustees or officers may be ratified by the vote of the stockholders representing at least two, thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of the members in a meeting called for the purpose. The requisites are: 1. Any of the first three conditions set forth in the first paragraph of the above section is absent; 2, Full disclosure of the adverse interest of the directors or trustees involved is made at such meeting; and 3. That the contract is fair and reasonable under the circumstances. SEC. 32. Contracts Between Corporations with - Interlocking Directors. ~ Except in cases of fraud, and provided the contract is fair and reasonable under the circumstances, a contract between two (2) or more corporations having interlocking directors shall not be invalidated on that ground alone: Provided, That if the interest of the interlocking director in one (1) corporation is substantial and the interest in the other corporation or corporations is merely nominal, the contract shall be subject to the provisions of the preceding section insofar as the latter corporation or corporations are concerned. Stockholdings exceeding twenty percent (20%) of the outstanding capital stock shall be considered substantial for purposes interlocking directors. 2% Prime White Gemaent Corporation vs.IAC and Alefndro Te, GR. Na. L-68555, March 19, 1993. 278 =|i D ym i- BOARD OF DIRECTORS/TRUSTEES AND OFFICERS wTeRLOCKING Directors These are the members of the A ‘i board ‘ cement arc irene rt of acts © cra general rule: A contract between two or more cory ii i rectors shall not be invalidated on that, ground: aia having interlocking requisites: ‘The contract is not fraudulent; and 2, The contract is fair and reasonable under the circumstances. Exception: If the interest of the interlocking director in one corporation is substantial and his interest in the other corporation or corporations is merely nominal, he shall be subject to the provisions of section 31 insofar as the latter corporation or corporations are concerned. ‘Substantial interest - Stockholdings exceeding twenty percent (20%) of the outstanding capital stock shall be considered substantial for purposes of interlocking directors. SEC. 33. Disloyalty of a Director. - Where a director, by virtue of such office, acquires a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, the director must account for and refund to the latter all such profits, unless the act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked one’s own funds in the venture. Doctrine of Corporate Opportunity ‘A director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same. Note: ‘The doctrine shall be applicable, notwithstanding the fact that the director risked his own funds in the venture, 279TITLE III - BOARD OF DIRECTORS/TRUSTEES AND OFFICERS BATIEICATION by the stockholders i che doctrine of corporate o The act of a director violating t r a can be ratified by a vote of the stockholders owning or representing at. pa two-thirds (2/3) of the outstanding capital stock. SEC. 34, Executive, Management, and Other Special Committees, att the bylaws so provide, the board may create an executive comm composed of at least three (3) directors. Said committee may act, majority vote of all its members, on such specific matters within ty, competence of the board, as may be delegated to it in the bylaws or majority vote of the board, except with respect to the: (a) approval any action for which shareholders’ approval is also required; (b) fill of vacancies in the board; (c) amendment or repeal of bylaws or the adoption of new bylaws; (d) amendment or repeal of any resolution of the board which by its express terms is not amendable or repealable, and (e) distribution of cash dividends to the shareholders. The board of directors may create special committees of temporary or permanent nature and determine the members’ term, composition, compensation, powers, and responsibilities. EXECUTIVE COMMITTEE It is a body created by the by-laws and composed of not less than three members of the board which, subject to the statutory limitations, has all te authority of the board of directors to the extent provided in the by-laws. Limitations on the powers of the executive committee 1. Approval of any action for which shareholders’ approval is also required; 2. Filing of vacancies in the board; 3. Amendment or repeal of by-laws or the adoption of new by-laws; 4. Amendment or repeal of any resolution of the board which by its express terms is not amendable or repealable; and 5, Distribution of cash dividends to the shareholders. Quorum required of the executive committee The committee may act, by majority vote of all its members, on such specific matters within the competence of the board. Problem: : C. F Corp,'s former president wrote a letter to the corporation: Board of Directors questioning the board's creation of the positions ©! Assistant Vice-Presidents (AVPs) for Corporate Planning, Operations Finance and Administration, with a monthly remuneration of P1305 each, and the election thereto of certain members of the board. In his aforesaid letter, C requested the board to take necess®) action/actions to recover from those elected to the aforementiom positions the salaries they have received, 280 —— fhTITLE III - BOARD OF DIRECTORS/TRUSTEES AND OFFICERS Subsequently, C, purportedly in representation of F Corp. and its stockholders, among which is X Corp, filed with the SEC a petition which he describes as a derivative suit against G, H, I, J, K, L, M, N, and 0 who were then the incumbent members of F Corp.’s Board of Directors, for alleged acts of mismanagement detrimental to the interest of the corporation and its shareholders at large, namely: 1. creation of an executive committee composed of 7 members of the board with compensation of P500 for each member per meeting, an office which, to C, is not provided for in the by-laws of the corporation and whose function merely duplicates those of the President and General Manager; vax Did F Corp’s Board of Directors acted within its powers in creating the executive committee? Answer: Unfortunately, the bylaws of the corporation are silent as to the creation by its board of directors of an executive committee. Under Section 35 of the Corporation Code (Now Section 34, Revised Corporation Code), the creation of an executive committee must be provided for in the bylaws of the corporation. Notwithstanding the silence of F Corps bylaws on the matter, we cannot rule that the creation of the executive committee by the board of directors is illegal or unlawful. Qne reason is the absence of a showing as to the true nature and functions of said executive committee considering that the “executive committee,” referred to in Section 35 of the Corporation Code (Now Section 34, Revised Corporation Code) which is as powerful as the board of directors and in effect acting for the board itself, should be distinguished from other committees which are within the competency of the board to create at any time and whose actions require ratification and confirmation by the board. Another reason is that the Board of Directors has the power to create positions not provided for in F Corp.'s bylaws since the board is the corporation's governing body, clearly upholding the power of its board to exercise its prerogatives in managing the business affairs of the corporation.2” Note: The board of directors may create special committees of temporary or permanent nature and determine the members’ term, composition, compensation, Powers, and responsibilities. Pipinas Port Services Ine. and Mindanao Terminal and Brokerage Services, Inc vs. VietoroS.Go, etal, GR No, 161896, March 16,2007, 281