DIRECTORS’ RIGHTS, DUTIES, AND LIABILITIES
a)Right to Inspect Corporate Records–if done in good faith for purposes germane to his position as dir, this right is absolute.
b)Duty of Care–dirs must exercise the care of an ordinarily prudent and diligent person in a like position, under similar circumstances. There is no liability (absent a conflict of interest, bad faith, illegality, or gross negligence) for errors of judgment (business judgment rule–the rebuttable presumption that action was taken on an informed basis, in good faith and exercising reasonable care), but the dir must have been reasonably diligent before the rule can be invoked (Shlensky)
1)The duty of care requires:
I)Education–a dir should acquire at least a rudimentary understanding of the business of the corporation;
ii)Information–a dir is under a continuing obligation to keep informed about the activities of the corp;
iii)Participation–dirs must “generally monitor” corporate affairs, but need NOT involve themselves in the day-to-day operations; (i.e. they should attend board of dirs meetings with reasonable regularity).
iiii)Inquiry–a dir has a duty to inquire when circumstances would alert a reasonable person for the need of inquiry.