Evolving directors’ duties in the common law world

Abstract

Legal scholars have long discussed the gap, or “acoustic separation”, between stringent standards of conduct (“conduct rules”) and more lenient standards of review (“decision rules”) in legal regulation. This gap has been particularly stark in the United States in relation to directors’ duty of care.The goal of this chapter is to explore a range of developments relating to directors’ duties across several common law jurisdictions, including the US, UK Australia and Canada against the backdrop of conduct and decision rules. For example, contemporary Australian case law on the duty of care and diligence, although highlighting the ongoing tension between conduct rules and decision rules, diverges from US law in many key respects. Also, under Australia’s regulatory model, the Australian Securities and Investments Commission (“ASIC”), the primary corporate regulator, operates as the main enforcement mechanism for breach of directors’ duties.Finally, the chapter assesses some recent developments in the common law world on the perennial issue of to whom directors owe their duties, and the extent to which stakeholder interests can, or must, be taken into account in board decision-making.