Serving on a board brings real authority, and real responsibility. Directors owe legal duties to the company, and the way they make decisions matters as much as the decisions themselves.

Boards that understand their duties, and document how they meet them, are better protected and make better choices.

The Duty of Care

Directors must act with the care a reasonably prudent person would use. In practice that means reading the materials, asking questions and seeking expert advice on complex or high-risk decisions.

The Duty of Loyalty

Directors must put the interests of the company ahead of their own. Conflicts of interest should be disclosed promptly, and conflicted directors should step back from the relevant discussion and vote.

Good Process Builds Protection

Clear agendas, accurate minutes and a record of the information the board relied on show that a decision was considered carefully. If a decision is later challenged, that record is often the board’s strongest defense.