Director Liability
One way to influence directors’ ethical conduct and create more accountability for them is to increase their legal liability for poor performance and business misconduct.
Directors are not reasonably expected to have first-hand knowledge of all company business affairs under their oversight capacity. Nevertheless, directors are responsible for ascertaining the validity, reliability, and quality of information provided to them. In most circumstances, directors make decisions by relying on information furnished by corporate officers, employees, and professionals, including legal counsel and accountants. Thus, the effectiveness of their performance depends on the validity and quality of the information provided to directors.