Are you considering a lawsuit against a director or Board of Directors in San Diego or Southern California? There are several reasons for a dispute with a corporate board of directors or an individual board member.
The primary purpose of a Board of Directors is to independently monitor the decisions of corporate management and to provide guidance with regards to the direction of the company. There are often competing factions between larger shareholder groups and smaller minority interests.
The Legal Duties of any Board Member
Questions often arise around fiduciary duty and the legal responsibilities board members have to the corporation and to its shareholders. Is the board member exercising their duty of loyalty to act in the best interests of the corporation and all shareholders? Is there an appearance of self-dealing, “sweetheart deals” or coercion to move business from the corporation to another company in which the board member owns or controls and interest?
Board members have the legal duty to act in good faith on behalf of your corporation. They must give full attention to the responsibilities and sworn duties to the corporation. A conscious disregard or dereliction of duties can be the basis for a lawsuit against a director or board member, as well as the board of directors itself.
All board members also carry a legal duty of care to make sound business decisions and financial judgments based upon the “reasonable” actions any other professional would take if they were in a similar position. The board member is responsible for investigating and researching all issues to inform their decisions while always acting in the best interests of the corporation.
Common Reasons for a Lawsuit Against a Director or Board of Directors
What are some common reasons for a lawsuit against a director or board of directors? A dispute with a corporate board of directors or board member may arise around compensation, especially when the CEO has too much influence on the board. The board may vote to provide compensation packages to themselves or the CEO which are not commensurate with the performance of the company or the work at hand. The improper distribution of funds is a common theme in lawsuits against a board of directors or its members.
Another is breach of fiduciary duty to the shareholders, or employees of the corporation. Failure of the board to adhere to corporate bylaws, accounting principles, auditing oversight, and to ensure proper corporate governance are other common areas of dispute. When a shareholder believes the Board of Directors is leading the company in the wrong direction, a derivative lawsuit may be required.
The attorneys at the Watkins Firm have managed thousands of cases involving a lawsuit against a director or board of directors as well as the defense of board members and derivative lawsuits for decades. If you are concerned about the performance of a Board of Directors or a member of the board, or are a board member who faces potential litigation we invite you to review our podcast Episode 11 – Resolving Business Disputes as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today. Let’s discuss the dispute at hand and the most effective strategies to successfully resolve it.
