Liability of Corporate Boards of Directors
What liability do corporation board of directors members have in their board positions? Not as much as you might expect. Corporate board members have a good deal of latitude within the scope of their duties as corporate board members. Board members must be free to act in the interest of the shareholders in order to run the corporation in the best way they see fit and to take appropriate risks to help the company grow.
But corporate boards do need to be concerned about liability. Specifically, boards have liability in several areas:
- Duty of Care
Boards have a duty of care to act in the best interest of the shareholders.
- Duty of Loyalty
Boards have a duty to avoid potential and actual conflicts of interest.
- Personal vs. Corporate Assets
Boards have a duty to avoid intermingling corporate and personal assets.
Many boards purchase Directors and Officers Liability insurance (D&O) to protect themselves against lawsuits.
