Individual or Collective Liability for Corporate Directors?

Darian M. Ibrahim, University of Arizona James E. Rogers College of Law

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93 IOWA L. REV. __ (forthcoming 2008)

Abstract

Fiduciary duty is one of the most litigated areas in corporate law and the subject of much academic attention, yet one important question has been ignored: Should fiduciary liability be assessed individually, where directors are examined one-by-one for compliance, or collectively, where the board’s compliance as a whole is all that matters? The choice between individual and collective assessment may be the difference between a director’s liability and her exoneration, may affect how boards function, and informs the broader fiduciary duty literature in important ways. This Article is the first to explore the individual/collective question and suggest a systematic way to approach it. This Article offers both a descriptive examination of how some courts have answered this question (often implicitly), and a normative analysis asking whether the courts’ tentative answer makes for good corporate governance policy.