Director's duty not to consciously determine the company to break the law – reality or controversy?

Abstract

The paper at hand will analyze directors’ duty not to make decisions which determine corporate violations of positive legal norms and it will provide an interpretation of corporate governance practices that underpin this duty in pre-existing institutions. In the first part, we will pursue the doctrinal attempts of integrating the duty of compliance within the contents of the duty of care or duty of loyalty. We will follow the evolution of this duty, from a simple effect of the ultra vires doctrine, to an obstacle of the contractual underlying of companies, to an element of the duty of loyalty. The paper will review effects that corporate legal violations have on agents’ liability, such as tax law, competition law, labor law, human rights and environmental law breaches, and will illustrate other essential features of this duty, such as compliance with corporate governance codes, ethics and corporate social responsibility. Finally, we will demonstrate that regardless of the approach of good faith in corporate governance, as a distinct fiduciary duty or as element of the duty of loyalty, the duty of compliance is a prerequisite of good faith and can be accomplished simultaneously with the duty to maximize corporate profit and shareholders' wealth.

Keywords

• duty of compliance
• duty of care
• duty of loyalty
• good faith
• directors' liability
• transnational justice