2018 was a challenging year for many independent corporate directors, in large part due to the array of corporate crises stemming from the behavior of CEOs and other senior employees. These events, besides creating boardroom turmoil in their own right, prompted some to question whether the independent directors at the affected companies were living up to their responsibilities to provide informed oversight of management’s activities. There can be no doubt that over the past year the spotlight on directors has shone more brightly than ever.
In the memo below, RK&O partners briefly recap the fundamental fiduciary duties owed by corporate directors, and then identifies specific areas on which independent directors should focus as they strive to fulfill those fiduciary obligations. Some of the points included are straightforward principles based on common sense and black letter law, but unfortunately they have been overlooked by boards in some of the recent cases. For this reason, it is useful for independent directors to remind themselves of these basic rules of thumb.