The Role of Company Directors Essay Example | Topics and Well Written Essays - 2500 words

The Role of Company Directors - Essay Example Fiduciary duty is inherent amidst the interaction between directors and their company, trustees and their trusts, and lawyers and their customers. Barnet (2008) has defined fiduciary duty as a model of care observed in a legal correlation of faith and assurance involving an individual in a position of control, authority or influence, and another who is reliant on the appropriate exercise of that power...intrinsic in fiduciary duty is the accountability to perform in excellent confidence and honesty, the duty to work in the interests of the principal and to shun self-dealing transactions, and the commitment to not wield unreasonable demands or to proceed without the awareness and blessing of the principal. In a landmark case involving Caremark International Inc.1996 by the Delaware Chancery Court, the role of company’s directors was expanded to encompass liability in monitoring the company’s operations or ‘oversight liability’. This in effect meant that the directors had a fiduciary duty of closely supervising or overseeing the company’s daily transaction thus had to keep up-to-date on the regular operations of the corporation. The Delaware Supreme Court’s decision, Stone v. Ritter [Del. Supr., Jan. 27, 2009] upheld that the directors’ failure to ‘act in the face of a known duty to act’ is a breach of the duty of loyalty. To stem the excesses of the corporations in the US, the Sarbanes-Oxley Act was enacted even as the courts stepped up punitive actions on errant directors and firms engaging in fraudulent activities. As a consequence, many directors are increasingly getting more involved in the company’s operations to offset being charged with negligence and abdication of their fiduciary duties (Rehfeld, 2005).