Book Chapter

Book Title

Directors' Personal Liability for Corporate Fault: A Comparative Analysis


Helen Anderson

First Page


Last Page




Download Full Text (429 KB)


This book chapter outlines sources in U.S. law of personal liability for directors of corporations, with a focus on liability for wrongdoing by the corporation. The chapter surveys director liability: to creditors for violations of state corporation statutes (e.g., liability for defective incorporations, ultra vires corporate acts, and improper dividends, loans to directors, or dissolution); under common law veil piercing theories; under common law and statutes applying agency and director participation theories; and the responsible corporate officer' doctrine. The chapter provides a brief case study of potential director liability under CERCLA (the Superfund statute). The chapter briefly examines why U.S. law appears to impose less liability on directors than the laws of other countries. Relatively lower liability reflects the structure of U.S. corporate law, which gives directors greater discretion in making business decisions and delegating responsibility to officers and employees. Directors may thus be further removed from active involvement in corporate misconduct. Several sources of director liability thus create a disincentive for directors to police corporate misconduct. The chapter sketches normative, due process, and economic explanations for restrictions on director liability and less active director involvement in corporate decision-making. The chapter outlines how corporate law (e.g. the Caremark case) and securities regulation (e.g. Sarbanes Oxley) provide counterweights to the disincentives to director monitoring. The rule structure that makes director liability for corporate misconduct rarer in the United States compared to other jurisdictions may represent another implicit subsidy from tort creditors to shareholders and capital formation.



Publication Date



New York, NY


Kluwer International



Directors Personal Liability for Corporate Fault in the United States

Included in

Law Commons



To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.