On The Duty Of Directors On The Company Law Of The United States

ABSTRACTAs the shares of contemporary big corporations disperse among so many shareholders, the power distribution of corporation has changed from "meeting of shareholders centered" to "board of directors centered". The law gives board of directors almost all power to manage business and affairs of corporation. Consequently, the theory and practice on director's duty has got great development. This paper discussed in detail the theories and practice on director's duty in American corporation law with author's analyses and evaluation, and made opinions and suggestions on how to draw on the experience of America for improving China's relevant legal system.This paper is divided into four chapters.Chapter I is about the basic theory of director's duty. In the history of common law, the relationship between directors and corporation experienced three stage: trust relation theory, agency relation theory and sui generis relation theory. Trust relation and agency relation each describes some features of director-corporation relationship from different profile. But both cannot cover all respects of such a relationship. Now widely accepted theory is sui generis relation theory, which recognizes director-corporation relation as a special fiduciary relationship. This special fiduciary relationship thus becomes the base of the theory on director's duty in common law.Fiduciary duty is a concept originated from trust law. In fiduciary relationship, fiduciary owes obligation to another person who relies on and places confidence in him to act for the benefit of such another person and subordinates his own interest to the interest of such another person. In common law, such duty is called "fiduciary duty". Fiduciary duty arises from an unequal relationship between certain parties. It demands the fiduciary not to use the position, power and opportunity the relationship rendered for interest of fiduciary himself or that of any third parties other than the beneficiary. It represents the highest standard of dutiesr content of fiduciary duty in tradition. Chapter II discusses in detail the contents of duty of care. First I take the Model Corporation Act as the instance to analyze the meaning of statute provisions. Than some cases are reviewed to demonstrate the application of the request on duty of care. The statute sets a relatively low standard for director's duty of care. It only demands director to act with care that an ordinary prudent person of similar position under similar circumstances will exercise. Relevant cases and explanations reveal that to decide whether or not director performed his duty of care will depend on nature and scope of director's position and the special obligation he assumed. And the nature and scope of his position depend on such factors as nature of the business, urgency and importance of the issue and size and complication of the corporation. In legal practice, the violation of duty of care is analogy to "gross negligence" in tort, which means directors are only personally liable when their acts constitute "negligence" or "gross negligence". And the plaintiff has the burden to prove that director's violation is the proximate cause of the damages to corporation.Business Judgment Rule is a doctrine developed from the case law of America for protecting directors independently execute the power of managing corporation business. The rule is that director is not liable for his acts based on reasonable information ration, even if the decision turns out to be wrong or even a disaster to corporation from a hindsight p...