Directors’ Duty to Monitor: Experience in the Banking Sector
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Part I of Directors’ Duty to Monitor: Experience in the Banking Sector discusses the development of the directors’ duty to monitor by the Delaware courts. It then discusses the view of certain commentators that Delaware law provides for a “lax liability” regime (in some cases arguably a “no liability” regime) for board oversight responsibility. To evaluate the actual standards applicable to the directors of bank holding companies, Part I provides a detailed discussion of derivative actions mounted against bank holding companies both before and after the financial crisis. This discussion focuses on the distinction (as well as the possible interplay) between the corporate law standards for board oversight and the regulatory standards for board oversight. Part I also discusses the force of norms under Delaware law and the influence of best practice standards adopted by industry groups, including financial industry groups. Many commentators have argued that Delaware law is influential in establishing norms for director behavior even though the case law rarely finds directors liable for a failure to monitor. These commentators also argue that best practice standards adopted by industry groups have had a significant influence on directors and have resulted in more robust oversight by directors.
Part II of the eBook discusses the regulatory and supervisory approaches that have been adopted by the bank regulatory authorities to board oversight at the level of both the bank and the bank holding company. There are manifold elements in these regulatory and supervisory approaches. Federal banking statutes expressly dictate certain board oversight requirements for banks and bank holding companies and provide the federal banking authorities with administrative enforcement powers, such as the power to impose civil money penalties on officers and directors of banks and bank holding companies. The FDIC also regularly pursues litigation against officers and directors of failed banks to recover damages for the receivership estate of failed banks, generally based on claims of gross negligence. These various ex post mechanisms exert a significant in terrorem effect on directors.
Table of Contents
Directors’ Duty to Monitor: Experience in the Banking Sector--Part I (September 2016)
Directors’ Duty to Monitor: Experience in the Banking Sector--Part II (October 2016)