I think you frame the issue in a nice way nd descriptively capture the way in which cases appear to have approached the duty of care analysis. Of course that leaves open the question of whether it is normatively desireable. A collective approach sounds less rigurous and seems to allow a director to seek cover under their fellow directors. Perhaps the care standard should allow this cover in the same way that directors are allowed to rely on the expertise of other specialists. Yet the approach still bothers me. On the one hand, perhaps there is no need for concern because in order for this approach to work at least a majority of the board must be performing their duties properly. Then too, the current climate may pressure directors to comply with their duty notwithstanding the lack of liability threat (your next post!). On the other hand, this approach reduces the overall accountability both of the board and individual directors by suggesting that a director's errors can be corrected by others and by suggesting that at any given time only a majority of the board need be concerned about compliance with their responsibilities. In that sense, doesn't the approach increase the likelihood of suboptimal board performances?

Thanks so much for your helpful comment, Lisa. I do worry about excusing the careless director under cover of the collective approach, but I think I worry more about courts imposing liability or granting injunctive relief if that director’s carelessness didn’t meaningfully impact the board’s decisionmaking. And while an individual approach might better entice all directors to exercise due care, it could also produce some practical problems. As I write in the paper:

"[I]t is also important to consider additional negative effects on the board’s functioning that could result from using the individual approach in the due care setting. The consensus-driven decisionmaking process that now exists could turn into a process where directors are pitted against each other (e.g., one director claiming that other directors withheld relevant information) to avoid culpability. Board minutes might become detailed to the point of showing the role that each director played in deliberations, focusing the directors’ attention on personal perseverance rather than the business of the corporation. In cases that go to trial, directors facing individual treatment might request separate counsel due to their individual exposure. This could add to the cost of corporate reimbursement for directors’ attorney’s fees, and could make trials unruly given an average board size of seven to nine directors. An individual focus could also require courts to itemize and account for individual differences among directors (including a director’s insider/outsider status and expert/non-expert qualifications) to assess due care compliance. As a result, both board and judicial efficiency would suffer if an individual approach was applied in duty of care cases."

I think you touched on some of these concerns in your initial post, and they strike me as valid. Considering all factors, I guess I view the collective approach as the better -- if not perfect -- solution in these cases.

While I agree with mcuh of your oroginal analysis, I think your comment overstates the threat associated with individuated analysis of director conduct. First, I don't foresee that a corporation would have to keep detailed minutes reflecting each director's participation in meetings. The crucial questions would be -- did she attend the meetings and was relevant information made available to her at the meetings?

Similarly, in the duty of care context, there's really not much reason to worry about personal liability -- as statutory protections plus indemnification and/or insurance would almost always prevent any director from having to face personal liability. Moreover, if a court found that an individual director had breached a duty of care but that the board's overall process was sound, wouldn't a court have to find that, despite an individual director's breach, plaintiffs were not harmed?

If I'm right about that, I would think there could be some corporate governance value in a court's finding that an individual director had breached her duty of care. The possibility of such a quasi-official censure would create incentives for adherence to the duty of care.

Finally, now that the Disney court has ventured to support the notion of a duty of good faith, how do you think the good faith analysis should be carried out?

Hi Jeremy, thanks for your thoughtful comment. I think you're right to emphasize the importance of § 102(b)(7) and other mechanisms that make personal liability for due care breaches unlikely, at best. On the other hand, if injunctive relief is still possible, perhaps it's not a duty whose breach is without a remedy. Also, you raise a very interesting point (one that I’m currently struggling with) when you ask whether plaintiffs can be harmed if the board’s overall process was sound. I think of this as a proximate cause issue – can one director's carelessness ever be the cause of a plaintiff’s harm? In loyalty cases, it certainly can be. But in due care cases, are there situations in which we can say that a single director’s carefulness, rather than carelessness, could have swayed the board’s outcome (perhaps some duty to monitor cases)? If so, then can’t we say that the one director’s carelessness was the cause of a plaintiff’s harm, just as we do in loyalty cases, making the individual approach a viable option in due care cases? More fundamentally – and perhaps this is what you’re really getting at – if due care is only a procedural analysis, then can a board that follows a rational process ever make a decision that “harms” the plaintiff? In other words, can we disentangle substance from procedure and say the procedure was acceptable, but the decision was still bad? (I know that corporate scholars have discussed this point, but the whereabouts of that discussion escapes me this morning.) If we can say that, then can we attribute that bad substantive decision to the one director's failure to follow acceptable procedure? This seems like a stretch, but maybe there are situations where it's plausible (e.g., if the careless director was a financial expert and the board's decision went to that expertise)? As you can see, I have more questions than answers here, and I’m grateful to you or other readers who might help me think through these important issues a bit more.

Regarding good faith, in my paper I argue that the emergent duty of good faith warrants an individual director approach because the Delaware Supreme Court has limited what counts as a breach of the duty of good faith, at least for the time being, to intentional wrongdoing. (As you know, the two categories it set forth in Disney were “subjective bad faith” and a “conscious and intentional disregard of duties.”). This makes bad faith look more like disloyalty than gross negligence.