It appears to be unquestionable that Directors and Officers today owe Fiduciary Duties enforceable by Shareholders of public corporations:
As fiduciaries for the owners of the companies on whose boards they serve, directors have a duty to act in shareholders' interests. After all, they are the shareholders' representatives, and they are charged with ensuring that their companies are operated soundly and with long-term profitability in mind. Yet it doesn't always seem to work out that way.
Gretchen Morgenson, "Fair Game/What Iceberg? Just Glide to the Next Boardroom" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, December 27, 2009). The Insurance Company which issues a Directors and Officers Liability Insurance Policy will often and understandably contend that a claim for alleged Breach of Fiduciary Duty is, including under all the circumstances alleged, a claim for an alleged and Excluded "dishonest, fraudulent or criminal Wrongful Act". Parenthetically, in order to be Excluded conduct "arising from" deliberately fraudulent conduct, an adjudication or plea of guilty may be required, i.e., a determination of the conduct as deliberately fraudulent may be required in order for such an Exclusion to be applied. See Download Herley Indus., Inc. v. Federal Insurance Co. (E.D. Pa. Opinion Signed August 21, 2009; Filed August 24, 2009), attached Official Slipsheet Opinion at 18 (plea of guilty in a related criminal proceeding based on the same alleged deliberately fraudulent conduct as viewed by the U.S. District Court, was held to furnish a sufficient adjudication and thus the basis for applying such Exclusion: "The securities and derivatives actions therefore arose from the adjudicated criminal actions and are thus barred from coverage under the policy."). The Online Docket in this case reflects that a Notice of Appeal was filed on September 22, 2009 and that appeal is apparently still pending.
There are duties owed by Directors and Officers, however, that may not trigger Exclusions. Acting with ordinary care based on their past experience serving as Directors and Officers at previous companies may be taken into account. Past experience with the same practices and the same results at previous companies seems relevant at least to evaluating whether the individual Director or Officer allegedly knew or should have known that certain practices would likely lead to certain ends, particularly when those results have included the experience that the practices included causing Damage to Shareholders and others. See generally Gretchen Morgenson, "What Iceberg?", supra.
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