In particular, the apparent insider dealings by certain members of the board of directors of Adelphia Communications Corp., one of the largest cable companies in the United States, shows at a minimum a lack of attention to their duties. The NASDAQ's recent de-listing of Adelphia stock may also be in part a result of a failure of those directors to see clearly their duty to their company and its shareholders.

To what standard should Adelphia directors have been held in avoiding conflicts of interest with their company? Stated differently, to what duty of loyalty are directors of a company held? Specifically, to what duty of loyalty are directors of an Alaska company held?

Corporate governance

In the arena of corporate governance, directors on a company board as a matter of Alaska law owe a duty of loyalty to the company. That is, generally, a director cannot place himself or herself in a position where personal interests conflict with the director's duty to the company. This duty is basic to corporate governance.

For-profit corporations formed in Alaska have a guideline for directors carrying out this duty. The duty of loyalty is set forth in the Alaska statutes as a part of the Alaska Corporations Code.

The code also allows a few limited exceptions to the duty, while at the same time keeping in mind the best interests of the company. These exceptions center on "interested directors" and "common directors."

Interested directors

Under the Alaska Corporations Code an agreement between a company and one or more of its directors is permissible if the material facts regarding the agreement and the interests of the directors are fully disclosed or known to the shareholders or the board.

Also under the code, such an agreement is not prohibited because those persons are present at the meeting of the board acting on that agreement.

Should the interested director seek compliance with these provisions through action by the shareholders, the agreement must be approved by a vote of the shareholders in good faith. The vote taken in this context must exclude any shares owned by the interested directors.

Should the interested director seek compliance with these provisions through the board, the agreement must be approved in good faith by the board. The vote taken in this context must exclude the interested directors.

Interested directors have the burden of proving the agreement is just and reasonable to the company at the time it was acted upon by the board.

The code specifies that a director is not an interested director in addressing a resolution fixing compensation of another director as a director, officer or employee of that company.

The agreement may be a contract or other transaction between the company and one or more of its directors. In addition, the agreement may be between the company and another corporation, firm, or association in which the interested directors have a material financial interest.

Common directors

A common directorship results where one or more individuals are directors of two companies. They are sometimes referred to as "common directors."

An agreement between companies having common directors is allowed because one or more of the common directors are present at the board meeting at which action on the agreement takes place, provided certain procedural steps are taken. These steps are as follows: