Court of Directors

“ Another by-law declares that 'the superintendent and all other persons shall in all cases be subject to the control of the board of directors, in everything where the board shall elect to exercise such control;' and the court finds that, in the making of the original contract sued on, and in the extension of the time for the payment of drafts, as hereinafter mentioned, the board of directors of plaintiff did not at any time or in any way elect to exercise the control over its officers given said board by said by-laws. ”

“ If the Directors are known to devolve the whole cognizance of the offences charged on their servants so highly situated upon the Supreme Court, an excuse will be furnished, if already it has not been furnished, to the Directors for declining the use of their own proper political power and authority in examining into and animadverting on the conduct of their servants. ”

“ He always contended, that the first step towards an improved management of our concerns in India must be a reform at home, in the constitution of the Court of Directors and Court of Proprietors. He proposed some changes, not because they were sufficient, but because they were practicable, and suggested that the Directors, instead of being changed annually, should remain in office for several years ”

“ Such an association may make contracts, sue and be sued, and complain and defend in any court of law or equity as fully as natural persons. They may also elect directors; and the board of directors may appoint a president, vice-president, cashier, and other officers, and define their duties. ”

“ The directors are created a board, and not a corporate body. If the authority delegated to them can only be exercised by them when assembled as a board, with a proper quorum, and not by the separate assent of a majority of the whole body, (on which it is unnecessary here to express any opinion,) still it is clear, that their meetings and acts are but the meetings and acts of a board of agents acting ex officio, and not the meetings and acts of the corporation itself. ”

“ With regard to the present Court of Directors, I can only say they are universally despised and hated; will certainly be hard pushed next April, and, if I and my friends do not support them, must fall. Their ignorance and obstinacy are beyond conception. ”

“ They only require that the rule of responsibility declared by them shall be satisfied.' If the plaintiffs' cause of action required the application of the Federal statute in defining the liability of these directors with respect to the acts alleged and proved, the plaintiffs were entitled to its correct application. ”

“ A jury would have been justified, at least, in finding that the call was made by the directors within the meaning of the instructions although it did not appear that the directors went over the figures of the officers who made it up, and voted it specifically. ”

“ It provided for the election of seven directors, and of a president, secretary, and treasurer; and that the directors should elect out of their number one who, with the president and treasurer, should be a prudential committee, and that the committee should be charged with such duties as might be devolved upon it by the board of directors. The defendants and four others were elected directors. ”

“ In the former class of cases, director action is analyzed under the business judgment rule, which prevents judicial second guessing of the decision if the directors employed a rational process and considered all material information reasonably available--a standard measured by concepts of gross negligence. ”

“ The fact that the directors in the exercise of their judgment, either because they were disinclined to undertake a burdensome litigation or for other reasons which they regarded as substantial, resolved to comply with the legislative or administrative demands, has not been deemed an adequate ground for denying to the stockholders an opportunity to contest the validity of the governmental requirements to which the directors were submitting. ”

“ The liability of directors to the corporation for damages caused by unauthorized acts rests upon the common-law rule, which renders every agent liable who violates his authority to the damage of his principal. A statutory prohibition is material, under these circumstances, merely as indicating an express restriction placed upon the powers delegated to the directors when the corporation was formed.' it is perhaps unnecessary to attempt to define with precision the degree of care and prudence which directors must exercise in the performance of their duties. ”

“ Two of these statements-official reports formally attested-were, as we have said, annexed to the petitions. The proof of representations chiefly concerned these reports and others of a similar sort. In contemplation of law, the question upon the case made by the plaintiffs was essentially one as to the liability of these directors for conduct governed by the Federal act. The conclusion of the trial court that there could be a recovery at common law, independent of the Federal statute, did not alter the inherent character of the actions. ”

“ If the directors had been a board constituted by an unincorporated company, or by a single person, for the like purposes, and with the like powers, it would scarcely occur to any person that the acts of the board must, of necessity, be reduced to writing, before they would bind their principal. The agents of private persons are not usually in the habit of keeping regular minutes of all their joint proceedings, and hitherto there has been no adjudication, which requires such a verification of their joint acts. ”

“ The fact is, the Court of Directors have nowhere declined accepting it; on the contrary, they caution the Governor-General and Council about the manner of receiving the tender of the money which they expect him to make. They say nothing of any call made on them by Mr. Barwell's agent in England; nor does it appear to your Committee that they "have descended to abuse." They have a right, and it is their duty, to express, in distinct and appropriated terms, their sense of all blamable conduct in their servants. ”

“ But when acts to be done are within the power and duty of the directors and are neglected, and thereby third parties are damaged, neither a court of law nor of equity, will allow the company to take advantage of that neglect. ”

“ The futility exception to the demand requirement may also determine the scope of the directors' power to terminate derivative litigation once initiated—the very aspect of state corporation law that we were concerned with in Burks. In many (but not all) States, the board may delegate to a committee of disinterested directors the board's power to control corporate litigation. ”

“ Of the shares allotted to directors as contrasted with those allotted to other employees, most are owned by the defendants sued. Whatever shares belong to others will be untouched by the decree. With all the procedural complexities possible hereafter if jurisdiction be declined, the hazard of inconsistent judgments affecting the directors inter se will not avail without more to halt the processes of justice and the award of such relief as the court is competent to give against those subject to its power. ”

“ Caremark itself encouraged directors to act with reasonable diligence, but plainly held that director liability for failure to monitor required a finding that the directors acted with the state of mind traditionally used to define the mindset of a disloyal director--bad faith--because their indolence was so persistent that it could not be ascribed to anything other than a knowing decision not to even try to make sure the corporation's officers had developed and were implementing a prudent approach to ensuring law compliance. ”

“ The injunctions entered in paragraphs 37 to 39, inclusive, compel the association to abolish its statistical committee and to refrain from establishing any committee with similar functions; enjoin it from retaining any of its present officers or board of directors who are defendants and also directors, officers or employes of any defendant corporation, and order it to submit to the Attorney General and to the court the names of directors or officers to be elected or appointed to succeed present incumbents. ”

“ While the court is not expected to substitute its business judgment for that of the directors in areas where particular business expertise is an ingredient of the decision, [13] the reasonableness of the business judgment of the conflicted directors' decision must be examined searchingly through a principled and disciplined analysis. The decision of the trial court did not plainly delineate and articulate findings of fact and conclusions of law so that this Court, as the reviewing court, could fathom without undue difficulty the bases for the trial court's decision. ”

“ The defendant directors have not in form been removed from their office, but their power as directors has been taken from them, and they are no longer able to carry into effect the orders of the stockholders made in fraud of the rights of the minority at the meeting in October. ”

“ Respecting the last prayer, the plaintiffs in error contend that the court erred in refusing the instruction as originally asked for, and in giving the same with said modification.
In the third section of defendants' said charter it is provided that the affairs of the company shall be conducted by four directors and a president; that two directors and the president shall form a quorum for transacting all the business of the company. ”

“ The court in charging the jury in this case instructed them that there was no doubt the call for this assessment had been properly proved; that the only possible question which could have arisen was whether or not certain persons were directors of the corporation at the time of the call, and that as the amended articles of the association provided that calls might be made by the directors, there was no doubt that the call in question was properly made. ”

“ Thus, to establish oversight liability a plaintiff must show that the directors knew they were not discharging their fiduciary obligations or that the directors demonstrated a conscious disregard for their responsibilities such as by failing to act in the face of a known duty to act. [46] The test is rooted in concepts of bad faith; indeed, a showing of bad faith is a necessary condition to director oversight liability. [47]
1. ”

“ St. Rep. 153, arose under section 3, art. 12, of the state Constitution, and the court there, in pointing out the purpose and effect of that provision, said (page 444 of 136 Cal., 69 P. 77, 82, 89 Am. St. Rep. 153) : 'The constitution merely makes the directors sureties for their fellow directors and for the officers of the corporation for moneys when so misappropriated as to make the officer misappropriating liable, and authorizing the creditors and stockholders to sue. ”

“ A committee of independent directors enjoys the presumption that its actions are prima facie protected by the business judgment rule. [71] That the Committee was required to consult with other corporate officers is irrelevant: the committee admittedly retained independent authority and discretion to approve or modify whatever it received as a recommendation. Plaintiffs' complaint should properly target only the members of the compensation committee at the time the options were approved: Vorsanger, Massey, Cassady, Allen, Hackley, Jones and Smith. ”

“ He was a member of the bar of Michigan, and acting as one of the attorneys of the company. He favored legal proceedings, but expressed a want of confidence in the local tribunals of the state by reason of the then excited condition of the public mind; he desired to get into the federal court, and so he resolved in object to a suit in the state courts. A meeting of the directors was thereupon improvised in his office to carry out the course resolved upon. ”

“ As explained above, however, to establish director oversight liability plaintiffs would ultimately have to prove bad faith conduct by the director defendants. Plaintiffs fail to plead any particularized factual allegations that raise a reasonable doubt that the director defendants acted in good faith.
The warning signs alleged by plaintiffs are not evidence that the directors consciously disregarded their duties or otherwise acted in bad faith; at most they evidence that the directors made bad business decisions. ”

“ Oakland, 104 U.S. 461, in speaking of this perfunctory effort to induce the trustees of the corporation to act, it is said: 'He (the plaintiff) must make an earnest, not a simulated, effort with the managing body of the corporation to induce remedial action on their part, and this must be made apparent to the court. If time permits or has permitted, he must show, if he fails with the directors, that he has made an honest effort to obtain action by the stockholders, as a body, in the matter of which he complains. ”

“ Upon their uprightness, vigilance and sound judgment depends the welfare of the greatest part of the trade of the country concerned. It is not to be wondered at that in view of this influence and independence of action the law courts have held directors to a strict standard of duty, and that the parliament of the United Kingdom has singled out directors from other agents for special legislation in the Directors Liability Act 1890, the Larceny Act 1861, the Companies Act 1867 and the Winding-up Act 1890. ”

“ The head of an executive department of the government, in the administration of the various and important concerns of his office, is continually required to exercise judgment and discretion. He must exercise his judgment in expounding the laws and resolutions of Congress under which he is required to act.' 'If,' he says, 'a suit should come before this court, which involved the construction of any of those laws, the court certainly would not be bound to adopt the construction given by the head of the department. ”