Fiduciary duties of financial institution directors and officers in the post-Dodd–Frank era

Abstract

In recent years, there has been a persistent question of whether management or members of a board of directors might be personally liable for the losses at their company. This concern has been heightened by the increasing tendency of the Federal Deposit Insurance Corporation (FDIC) and other bank regulators to comment explicitly in examination reports about board and management deficiencies and to bring an increasing number of actions against them, and for shareholders to bring actions against them. This article presents an overview of and proposes various approaches to defining the duties and responsibilities on the part of directors and officers of insured depository institutions (IDIs) in an era of heightened regulatory expectations. It also suggests various measures that should be considered by directors and officers of IDIs and other companies to better demonstrate the good faith nature of their efforts to properly discharge their duties and responsibilities should the results of those efforts fail to prevent serious losses at, or, worse, a failure of, the IDI or another company. Finally, the article discusses suggestions for protections from such liabilities.