Duty of Care

Meeting a director’s duty of care generally requires acting in a reasonable and informed manner under the given circumstances.  The standard of care is that which "an ordinarily prudent person in a like position would use under similar circumstances."

A "like position" may certainly include the position of being responsible for the governance of a similar type and size of organization.  However, the term should not be viewed by a director as restricted to how the typical director acted in the same organization.  Accordingly, a director charged with breach of his or her duty of care should not rely in complete faith on the argument that because the other directors of the corporation all exhibited the same standard of care, they must all be ordinarily prudent and there could be no breach of the duty.

Keeping informed (and making reasonable inquiries when appropriate) is key to meeting a director’s duty of care.  Voting with the majority or in the interest of another entity with which the director is affiliated without independent judgment about whether such action is in the corporation’s best interest may be a breach of the duty.  Caution must also be given to simply voting with a director who has purported expertise in an area relevant to the decision.  While it may be prudent to give such expert’s viewpoint strong weight, a director should consider other views before making an independent decision regarding board action.