The Bullet-Proof Board - A Guide To Avoiding Directors' Liability

Introduction

Few topics have attracted as much attention in recent years as corporate governance and the shareholder litigation associated with it. Most of the attention has focussed on compliance with new corporate governance rules which, for the most part, deal with structural issues. In other words, rules concerning the number of independent directors, the existence of certain committees of the board and circumstances in which independent committees are required.

What the focus on structure often leaves unsaid is that structure is not the end goal of effective corporate governance. Structure is a means, not an end. The true end goal of effective corporate governance is critical analysis by corporate directors. This is also what courts demand of directors. It is surprisingly simple for directors to protect themselves from liability to shareholders: they must be rigorous, diligent and analyse issues brought before them with a critical eye. As simple as this