How much inherent authority comes from holding the title of company president? A recent Georgia Court of Appeals decision helps answer that question.
In Georgia Dermatologic Surgery Centers, PC v. Pharis, a medical practice was owned 50/50 by Dr. Baucom and Dr. Pharis. Each physician was also an officer and a director. The shareholder agreement identified Dr. Baucom as the president and Dr. Pharis as the vice-president, secretary and treasurer. Both were also employees of the practice.
When disputes arose between them, Dr. Baucom purported to terminate Dr. Pharis’ employment for cause. Dr. Pharis then sued the practice for wrongful termination, arguing that because he had as much of an ownership interest in the company and the same seat on the board of directors as did Dr. Baucom, that Dr. Baucom had no more authority to fire him than he had the fire Dr. Baucom. For his part, Dr. Baucom argued that the inherit power of his presidency authorized him to fire Dr. Pharis.
The shareholder’s agreement limited the president’s authority to conducting the day-to-day operations of the company. Further, the practice’s by-laws provided that officers appointed by the board could only be removed on unanimous board approval. Because Dr. Baucom did not have the express authority to terminate Dr. Pharis’ employment, and lacked the votes to remove him from the board, the court found the termination improper and awarded Dr. Pharis damages.
Though corporate titles convey limited authority to act on behalf of the company, written agreements and ownership interests matter more. In the absence of express written authority to take a specific adverse action against a co-owner, an equal ownership interest will generally trump any implied authority that might otherwise arise from an executive title.