Toward a Public Enforcement Model for Directors' Duty of Oversight
V anderbilt Journal of Transnational Law VOLUME 45 MARCH 2012 NUMBER 2 Toward a Public Enforcement Model for Directors’ Duty of Oversight Renee M. Jones* Michelle Welsh** ABSTRACT This Article proposes a public enforcement model for the fiduciary duties of corporate directors. Under the dominant model of corporate governance, the principal function of the board of directors is to oversee the conduct of senior corporate officials. When directors fail to provide proper oversight, the consequences can be severe for shareholders, creditors, employees, and society at large. Despite general agreement on the importance of director oversight, courts have yet to develop a coherent doctrine governing director liability for the breach of oversight duties. In Delaware, the dominant state for U.S. corporate law, the courts tout the importance of board oversight in dicta, yet emphasize in holdings that directors cannot be personally liable for oversight failures, absent evidence that they intentionally violated their duties. * Associate Professor, Boston College Law School, A.B., Princeton University, J.D. Harvard Law School. ** Senior Lecturer, Workplace and Corporate Law Research Group, Monash University, Australia, B.A., L.L.B., L.L.M, Monash University, Ph.D. University of Melbourne. This Article benefited from comments from participants at the Conference on Corporate Governance and Business Ethics at Notre Dame Law School, the Panel on New Corporate Governance at the 2011 Annual Meeting of the Law and Society Association, and the Vanderbilt Law and Business Workshop. We would also like to thank Lisa Fairfax, Brian Galle, Ray Madoff, Dana Muir, Vlad Perju, and Brian Quinn for helpful comments on early drafts of this manuscript.
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